What are sick Industries?
Section 39(1) prescribes the conditions for sick Industries as follows:
- Operation for a minimum of five years after the date of commencement of commercial production or transaction,
- Working in less that 30% of the installed capacity for last 3 consecutive years because of circumstances beyond control without weakness on the part of the management,
- Losses for 3 consecutive years
Rule 32 also prescribes additional conditions for Sick industries as follows :
- Operating in losses for 3 consecutive years and equity of the company has decreased by 30%
- default in repayment of loans as per loan agreement
- Debt-Equity ratio is more than 1
- If shares are listed on stock exchange, the market value of the shares is less than the face value
- as per section 39(1)
What are the procedures to declare a industry, sick?
Rule 33 -
- Application should be submitted to Ministry of Industries in the prescribed Format
- Additional Equity for operation and project proposal to be submitted
- if the ministry on the reference of the committee finds it necessary to declare the industry sick, then the ministry shall submit a proposal to the GON to declare the industry as such
- GON may declare such industry sick
Classification of Sick Industry
| Fully Sick | Sick | Likely to be Sick |
| 1. Operating in Loss for the past 3 consecutive years and reduction in equity more than 70% | Operating in Loss for the past 3 consecutive years and reduction in equity more than 50% | Operating in Loss for the past 3 consecutive years and reduction in equity more than 30% |
| 2. Operating in less than 20% of installed capacity for the last 3 consecutive years | Operating in less than 25% of installed capacity for the last 3 consecutive years | Operating in less than 30% of installed capacity for the last 3 consecutive years |
| 3. Industry is not in Operation for past 3 consecutive years not because of weakness in management | Industry is not in Operation for past 2 consecutive years not because of weakness in management | Industry is not in Operation for past 1 consecutive years not because of weakness in management |
| 4. Will take at most 5 Years to be profitable after the concessions to be provided | Will take at most 3 Years to be profitable after the concessions to be provided | Will take at most 2 Years to be profitable after the concessions to be provided |
What are the concessions to be provided to Sick Industries?
If an industry is declared sick, then if it appears that such industry can be revived by providing certain exemptions facilities or concessions , GON may provide such Exemptions, facilities and concessions for rehabilitation, reconstruction and management of such sick industry. Further more, if a co-operative makes a proposal along with the consent of the investor then such co-operative can operate such industry if it is appropriate.
Notwithstanding anything contained in the prevailing laws, the Government of Nepal may grant exemption in full or in part on duty, fee or tax on any machinery, tools, or equipment to be imported by an industry identified as a sick industry under Section 39 or classified under Section 40 for its expansion, re-structuring or diversification.
Additionally, following Facilities may also be provided as per Rule 34
- Direction to BFI to convert the loan taken by the industry into Soft Loan(Subsidized loan)
- Direction to BFI to Exempt repayment of Interest or Penalty
- Direction to BFI to Provide additional subsidized loans
- Direction to BFI to extend the repayment period of Loans incase of Blacklisted Sick Industries
The type of Concession and facilities to be provided depends upon the classification of such Sick Industries
Published By
Aadesh Kandel
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