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Attempt the following. It is clear that the absence of capital and raw material is the main reason for the short term sickness. Explain it. - Organisation of Commerce and Management

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Answer in Brief

Attempt the following.

It is clear that the absence of capital and the raw material is the main reason for the short term sickness. Explain it.

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Solution

Industrial sickness means the industry which has financial losses over a period of time. Short term sickness is a temporary phenomenon.

Followings are the main capital and raw material reasons for short term sickness:
→Financial/Capital:

  1. Non-availability of Finance from Banks: Nationalised and Co-operative banks are not ready to finance SSI as there is less possibility of recovery of loans. Banks demand securities against loans, which is difficult to arrange for the small businessman.
  2. Loans from Moneylenders: As bank finance is difficult to raise, small businessman borrow capital from money lenders who charged a very high rate of interest.
  3. Shortage of Working Capital: Majority of small scale industries are depending on the local source of raw material which is seasonal. They have to buy a large quantity of raw materials to be used throughout the years which needs large finance.
  4. Unawareness of various Government Schemes: Due to lack of awareness among the owners of SSI about various Government Scheme for capital marketing, subsidies, etc. suffer capital problems.

→ Raw Material:

  1. A local source of raw material: Majority of small scale industries are depending on local supply of raw materials. Local suppliers of raw materials make artificial scarcity for the supply of raw materials which make an increase in product cost for the businessman.
  2. Seasonal supply of raw materials: Small scale industries are using a local supply of raw materials. The supply of raw material is seasonal. They don’t have a huge capital to stock a large quantity of raw materials due to this they have to stop production of goods after the season ends and face the problem of short term sickness.
  3. Shortage of raw material: There may be a short supply of raw materials due to natural calamities, transport strike, etc. affect the running of small scale industries.
  4. Poor quality of raw material: There is no grading or standardizing of raw materials supply to scale industry. This affect product quality and quantity.
Concept: Challenges of Small Scale Industries
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APPEARS IN

Balbharati Organisation of Commerce and Management (OCM) 11th Standard HSC Maharashtra State Board
Chapter 3 Small Scale Industry and Business
Exercise Q.7 | Q 5 | Page 58
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