Freight equalisation policy: Difference between revisions

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{{Use Indian English|date=February 2016}}
{{Use Indian English|date=February 2016}}
'''Freight equalization''' ''' policy''' was adopted by the [[Government of India]] (Union Government) to facilitate the equal growth of industry all over [[India]] (Indian Union). This meant a factory could be set up anywhere in India and the transportation of minerals would be subsidized by the Union Government. The policy was introduced in 1952, and remained in force until 1993.<ref name="Nand2007">{{cite book | author=Nand Kishore Singh | title=The Politics of Change: A Ringside View | url=https://books.google.com/books?id=96YxzysAnVUC&pg=PA237 | accessdate=15 February 2013 | year=2007 | publisher=Penguin Books India | isbn=978-0-670-08137-0 | pages=237 }}</ref>
'''Freight equalization''' ''' policy''' was adopted by the [[Government of India]] (Union Government) to facilitate the equal growth of industry all over [[India]] (Indian Union). This meant a factory could be set up anywhere in India and the transportation of minerals would be subsidized by the Union Government. The policy was introduced in 1952, and remained in force until 1993.<ref name="Nand2007">{{cite book | author=Nand Kishore Singh | title=The Politics of Change: A Ringside View | url=https://books.google.com/books?id=96YxzysAnVUC&pg=PA237 | accessdate=15 February 2013 | year=2007 | publisher=Penguin Books India | isbn=978-0-670-08137-0 | pages=237 }}</ref>
The policy hurt the economic prospects of states like [[Jharkhand]], [[Uttar Pradesh]], [[West Bengal]], [[Madhya Pradesh]], [[Assam]], [[Chhattisgarh]], and [[Odisha]], since it weakened the incentives for private capital to establish production facilities in these states.<ref name="Bank2008">{{cite book | author=World Bank | title=World Development Report 2009: Reshaping Economic Geography | url=https://books.google.com/books?id=ZkDE5CxAqHcC&pg=PA257 | accessdate=15 February 2013 | date=4 November 2008 | publisher=World Bank Publications | isbn=978-0-8213-7608-9 | pages=257 }}</ref> As a result of the policy, businesses preferred setting up industrial locations closer to the coastal trade Indian states like [[Maharashtra]], [[Gujarat]], [[Tamil Nadu]], [[Karnataka]] and [[Andhra Pradesh]] and markets in the [[India]] cities like [[Mumbai]], [[Delhi]], [[Bangalore]], [[Chennai]], [[Hyderabad]], [[Ahmedabad]] and [[Pune]].<ref name="Nand2007"/>
The policy hurt the economic prospects of states like [[Jharkhand]], [[Uttar Pradesh]], [[West Bengal]], [[Madhya Pradesh]], [[Assam]], [[Chhattisgarh]], and [[Odisha]], since it weakened the incentives for private capital to establish production facilities in these states.<ref name="Bank2008">{{cite book | author=World Bank | title=World Development Report 2009: Reshaping Economic Geography | url=https://books.google.com/books?id=ZkDE5CxAqHcC&pg=PA257 | accessdate=15 February 2013 | date=4 November 2008 | publisher=World Bank Publications | isbn=978-0-8213-7608-9 | pages=257 }}</ref> As a result of the policy, businesses preferred setting up industrial locations closer to the coastal trade Indian states like [[Maharashtra]], [[Gujarat]], [[Tamil Nadu]], [[Karnataka]] and [[Andhra Pradesh]] and markets in the [[India]] cities like [[Mumbai]], [[Delhi]], [[Bangalore]], [[Chennai]], [[Hyderabad]], [[Ahmedabad]], [[Cochin]], [[Thane]], and [[Pune]].<ref name="Nand2007"/>


== Rationale ==
== Rationale ==

Revision as of 04:16, 19 April 2024

Freight equalization policy was adopted by the Government of India (Union Government) to facilitate the equal growth of industry all over India (Indian Union). This meant a factory could be set up anywhere in India and the transportation of minerals would be subsidized by the Union Government. The policy was introduced in 1952, and remained in force until 1993.[1] The policy hurt the economic prospects of states like Jharkhand, Uttar Pradesh, West Bengal, Madhya Pradesh, Assam, Chhattisgarh, and Odisha, since it weakened the incentives for private capital to establish production facilities in these states.[2] As a result of the policy, businesses preferred setting up industrial locations closer to the coastal trade Indian states like Maharashtra, Gujarat, Tamil Nadu, Karnataka and Andhra Pradesh and markets in the India cities like Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Ahmedabad, Cochin, Thane, and Pune.[1]

Rationale

The freight equalization concept made "essential" items available at relatively constant prices throughout the country. These items included coal, steel and cement among many others. The idea was to promote balanced regional development of industries throughout the country but it developed coastal states like Maharastra, Tamil Nadu and Gujarat, Kerala etc. at the expense of Uttar Pradesh and the east Indian states.[3]

Results

Industrialists interested in setting up plants anywhere in the country would get coal, iron ore, aluminium etc. at the same price as they used to get in the mineral-rich states. A factory could be set up anywhere in the country and the transportation of minerals would be subsidized by the central government. As a result, there was growth of heavy and middle level-industry outside the mineral-rich regions of the country.

The policy took away the competitive advantage of the eastern parts of the country and Uttar Pradesh, and benefited the western and [[South India|southern] regions. According to British academic Stuart Corbridge, the policy discouraged the establishment of "resource-processing industries in Uttar Pradesh, Bihar and West Bengal particularly because their manufactured good was not included in the policy but on the other hand the raw materials and grains were included as a result the rice which was cultivated in Uttar Pradesh was sold in Tamil Nadu at just 2 rupees kg but people of Uttar Pradesh had to pay thrice for it even though it was cultivated in their home state, this has led to the rise of beneficiaries of the legal theft which include states like Tamil Nadu and Kerala who were able to offer aggressive subsidies and mid-day meals because the expense was also paid by the victim states like Uttar Pradesh, extractive industries, which seem to have imposed on the region a version of the 'resource curse was artificiality triggered through this policy ' noted more frequently in sub-Saharan Africa."[4]

In the coastal region, the policy especially benefited the states such as Tamil Nadu, Kerala, Karnataka, Andhra Pradesh, Telangana, Maharashtra and Gujarat. The finance minister T.T. Krishnamachari of Tamil Nadu equalised the freight, as a result the cement manufacturers shifted in South Indian states, as limestone and dolomite became cheaper to transport from North India.[5] The North Indian areas that benefited from the policy included Delhi, its surrounding districts and Punjab.[6]

The sufferers of this policy were the states of West Bengal, Bihar (including present-day Jharkhand), Madhya Pradesh (including present-day Chhattisgarh),Uttar Pradesh and Odisha. These states lost their competitive advantage of holding the minerals, as the factories could now be set up anywhere in India. This was not the case in the pre-independence era, when the major business houses like the Tatas and the Dalmias set up industries in Bihar, and most of the engineering industry was located in the state of West Bengal. Even after the removal of the policy in the early 1990s, these states could not catch up with the more industrialized states. In 1996, the Commerce & Industry minister of West Bengal complained that "the removal of the freight equalisation and licensing policies cannot compensate for the ill that has already been done".[7]

References

  1. ^ a b Nand Kishore Singh (2007). The Politics of Change: A Ringside View. Penguin Books India. p. 237. ISBN 978-0-670-08137-0. Retrieved 15 February 2013.
  2. ^ World Bank (4 November 2008). World Development Report 2009: Reshaping Economic Geography. World Bank Publications. p. 257. ISBN 978-0-8213-7608-9. Retrieved 15 February 2013.
  3. ^ Michael A Toman; Ujjayant Chakravorty; Shreekant Gupta, Rajat (2003). India and Global Climate Change: Perspectives on Economics and Policy from a Developing Country. Resources for the Future. pp. 58–. ISBN 978-1-891853-61-6. Retrieved 15 February 2013.
  4. ^ Sanjay Ruparelia; Professor Sanjay Reddy; Dr John Harriss (9 March 2011). Understanding India's New Political Economy. Taylor & Francis. p. 68. ISBN 978-1-136-81649-9. Retrieved 15 February 2013.
  5. ^ Raj Kumar Sen (1 January 2007). West Bengal today: 25 years of economic development. Deep & Deep Publications. p. 11. ISBN 978-81-7629-984-8. Retrieved 15 February 2013.
  6. ^ K. N. Prasad (1 January 1995). India's Economic Problems: Regional Aspects. M.D. Publications Pvt. Ltd. p. 107. ISBN 978-81-85880-74-7. Retrieved 15 February 2013.
  7. ^ Aseema Sinha (2005). The Regional Roots Of Developmental Politics In India: A Divided Leviathan. Indiana University Press. pp. 114–. ISBN 978-0-253-34404-5. Retrieved 15 February 2013.

Further reading

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