Print Edition - 2015-03-28 | MONEY
Government plans to relax criteria
- granting sick status to industrial enterprises
Mar 27, 2015-
The government has proposed to relax the criteria for granting sick status to an industrial enterprise. The new Industrial Enterprises Bill, which has been passed by the Cabinet and is ready to be tabled at Parliament for formal ratification, states that an industrial company which posts losses for three years in a row can be declared sick.
According to Industrial Enterprises Act 1992 which is currently in force, a company has to be in the red for five consecutive years to be given that status.
Likewise, the proposed Industrial Act has made the criteria for capacity utilization less stringent. Companies constantly incurring losses and operating at 30 percent of capacity can be categorized as sick. In contrast, the current law states that capacity utilization must be 20 percent or lower and the company must have been suffering losses for five consecutive years to be declared sick.
“We have tried to make the upcoming Industrial Enterprises Act as an umbrella act for the country’s industrial sector.
A number of issues have been incorporated to boost investor confidence and encourage them to invest in the country,” said Yam Kumari Khatiwada, joint secretary and spokesperson at the Ministry of Industry.
A need to make significant alterations to Industrial Enterprises Act 1992 had been felt as it had become obsolete due to a rapidly changing industrial scenario, which is why the act has proposed relaxing several provisions including those related to sick industries, added Khatiwada.
The proposed act has for the first time classified sick industries into three categories, namely fully sick, sick and heading toward sickness. The proposed act has stated that any industry categorized as sick can get a full or partial concession on government taxes while importing machinery and equipment for the purpose of expansion, restoration or diversification.
The existing act states that no duty, fee or tax of any kind shall be levied on the machinery imported by any sick industry for the extension and diversification of such industry.
“The current law has not defined sick industries adequately, but the proposed act has categorized them into three groups which will make it easier for the government to manage them,” said Khatiwada.
According to her, the enforcement of the proposed act will help the government provide facilities to the industries which have applied for sick status by classifying them under the appropriate category.
Earlier, a high-level committee headed by a former vice-chairman of the National Planning Commission Deependra Bahadur Kshetry had suggested providing different types of facilities based on the degree of sickness. A report prepared by the committee had suggested allowing fully sick industries to fold and providing loans at low interest rates and tax exemptions to industries that can be revived besides relaxing their past loans.
Likewise, for industries which are likely to become sick, the committee had suggested providing soft loans for at least a year to revive their confidence. The new provisions in the act are in line with the high-level committee’s recommendations, according to Khatiwada.
Similarly, the proposed act has stated that the government can take appropriate steps to revive sick industries with potential by providing them facilities and concessions based on the scale of employment, role in discouraging imports and foreign currency earnings through exports.
Published: 28-03-2015 09:06