INDUSTRIAL SICKNESS AND ITS CAUSES

It is nothing but state of industrial weakness or illness, that is the company fails to earn a reasonable profit. it is the continuos disportion in the debt equity ratio and falsification of the financial status of the industrial unit. it represents a stage where in the firm is not in a position to generate surplus on a regular basis and requires external credit, to survive in the market. when a unit is stick it shows signs of financial distress in the form of short term liquidity issues revenue and operating expenses.

CAUSES OF INDUSTRIAL SICKNESS:

EXTERNAL CAUSES:

NON AVAILABILITY OF RAW MATERIALS: when the supply of raw materials are not available regularly or in a good quality, the industrial units are bound to be in trouble. this often occurs in case of supply of imported raw materials.

HIGH PRICES OF INPUTS: when the cost of manufacture are high and sales realisation are low, the industrial unit cannot stand in the market. this happens when the prices of inputs such as price of fuel such as petroleum during energy crisis goesup whereas the competative forces keep down the prices of the products.

GOVERNAMENT POLICY: excessive governament control and restrictions of capital utilization, location, product mix, product quality, prices e.t.c, comes in the way of smooth functioning of the firms and often result in sickness to the firm.

INTERNAL CAUSES

FINANCIAL PROBLEMS: these problems are generally faced by small units. often the financial base of the small units are very weak. they generally borrow from their own sources or bank rather than approaching market. generally they are unable to meet their debt obligations in time and these debts accumulate.

FACULTY PLANNNG: mistakes in the planning stage are a major cause of industrial sickness. choice of faculty location is one such mistake. in case the unit is located at a place where basic infrastructure facilities are not available serious problems can arise.

MISMANAGEMENT: faculty management decisions and actions are a common cause of sickness in the small scale sector. poor maintenence of plant and machinery, lack of quality control system, absence of inventory management are some examples of mismanagement.