FACTORS AFFECTION

INDUSTRIAL LOCATION

A HISTORICAL NOTE ON HOW

PLANT LOCATION IS AN
IMPORTANT
It
was the decade ofFACTOR
1880s. The dense
forests of the Central Provinces teemed with
tigers, elephants and other wildlife. A thin line
of travelers wove its way through the jungles.
In front on horseback, was PN Bose, followed
by his family and a camel loaded with tents
and chattels. Atop the camel were the
servants of the party. Every ten or fifteen
miles the travelers would stop for the man at
the head to spend four or five days on field
survey searching for iron ore, coal, mica and
other minerals.

Pramatha Nath Bose

was a first graded
officer in the
Geological Survey of
India. He discovered
iron ore in the Chanda
and Durg districts of
Central India. On his
retirement he was
requested by the far
sighted Maharaja of
Mayurbhanj to explore
the mineral deposits
of the state in

MAN OF DESTINY

About the same time, as

Bose was braving the jungles
of Central Provinces, on the
west coast of India, a highly
successful textile magnate
was flipping through the
pages of a report THE
FINANCIAL PROSPECTS OF
IRON MAKING IN THE
CHANDA DISTRICT. The 43
year old industrialist was
Jamsetji Nusserwanji Tata.

FOUNDER OF THE
TATA GROUP

IT WAS NOT EASY TO FIND

HIGH GRADE COAL AND
IRON ORE

In 1882, Von Schwarz report titled "Report on the

financial prospects of iron-working in the Chanda
district" stated that the most important and the bestsituated deposits of iron ore in the Chanda district
were at Lohara. Warora nearby had coal which after
testing was found unsuitable. The mining terms
offered by the government were too restrictive.

LACK OF WATER
On 24th February 1904 a letter from P.N. Bose to
J.N.Tata spoke of good quality iron ore available in
Mayurbhanj state and gave information about
availability of coal in Jharia. After acceptance of
Mayurbhanj as a base for their mining operations,
the Tatas started looking for a site with railway
connections and proximity to the Bengal coal fields.
It was decided that the railway station and the town
of Sini on the Nagpur-Bengal Railway line would be
the site of the new steel works. But later on the
Tatas were greeted with the news that the proposed
reservoir at Sini, which they were counting on, had
proved impractical. The place had to be abondoned
for lack of water.

DISCOVERY OF SAKCHI

The Surveyors mounted their horses at Sini and took to

the river bed. And after a few hours down stream they
came across a site : a black trap-dike, crossing the river
diagnolly, and making an almost natural pick-up weir.
This was the meeting point of the two rivers, and would
never run dry. They were close to a village called Sakchi.
There was even a railway station called Kalimata a few
miles away. Finally this was chosen as the site for the
TATA IRON AND STEEL COMPANY(TISCO) (now TATA
STEEL) and the city was called JAMSHEDPUR.

JAMSHEDPUR
INDUSTRIAL
AGGLOMERATION
Thus, this example shows that how a combination of
various factors like land, raw materials, government
policy, water, transportation etc are important for the
establishment of industry.
Jamshedpur is the first planned industrial city of India.
Jamshedpur is a major industrial centre of East India. It
houses companies likeTata Steel,Tata Motors,Tata
Power,Lafarge Cement,Telcon,BOC Gases,Tata
Technologies Limited,Praxair,TCE,TCS,Tinplateand many
more. It is home to one of the largest industrial zones
ofIndiaknown asAdityapurwhich houses more than 1,200
small and medium scale industries

Flowchart Depicting
Various Factors Affecting
Industrial Location

PHYSICAL FACTORS
LAND
RAW MATERIALS
POWER/ENERGY

HUMAN FACTORS

LABOUR
TRANSPORT
MARKET
TECHNOLOGY
CAPITAL
GOVERNMENT POLICIES
AGGLOMERATION

LAND
Location
Size
Landform
Cost

Heavy industries: A large area of cheap low flat

land.
Light industries: Small pieces of land are also fine.

RAW MATERIALS
1. Ubiquitous
Water, Air, Soil
2. Localized
Iron ore, coal, gold, tin, wood..

POWER/ENERGY
Type of Power
Water H.E.P.
Fossil fuel
Coal

Oil
Natural Gases

Nuclear

Electricity

LABOUR
Cost of Labour Wage Level
Skills of Labour
Highly skilled, Semi-skilled,
Unskilled
Labour Mobility
Highly skilled (highly mobile)
Semi-skilled
(fairly
mobile)
Unskilled
(least mobile
Reputation

Declining in importance
Machines / Robots

Still very attractive for labour-intensive

industries

TRANSPORT
Transportation link is a
major advantage for any
region to be
industrialized.
It is important to make
available the raw
materials and for the
supply of finished goods
Transport cost is a
to the markets.
critical factor
affecting industrial
location in India.

MODES OF TRANSPORT

CHOSING THE CORRECT

MODE OF TRANSPORT
Mode

Long
distance

Short
distance

Speed

Water

Cheapest

Highest

Slow

Rail

Cheap

High

Fast

Road

Highest

Cheapest

Fair

Air

High

------

Fastest

Goods
Type
Bulky, low
value,
nonperishabili
ty
Bulky
Door to
door, light
High
value,
fragile
Perishabili
ty

MARKETS
Markets are where the finished products
will be finally go.
Markets attract many
industries to locate
Good infrastructure
Transportation,
Electricity supply, water
supply, drainage
system,
communication.
Large population size
Large labour force
Skilled labour
Obtain advanced
technology

The scene of the busy

Crawford Market of
Bombay.

Some industries are more likely to be located near markets

Perishable products: eg. Bread, cakes.
Fragile products: eg. Bottled drinks, porcelain..
Bulky and low value products: eg. Brick-making..
Labour intensive industries: eg. Toy-making,
electrical goods.
Keep close contact with consumers: eg. Jewellery,
printing
Involve large quanities of raw materials: eg.
Electric Appliance..
Specialized products:
eg. Automobile parts manufacturers located near
auto making centre

TECHNOLOGY

Technology is very importance

It change the production process completely
It is a localized factor
Ways to obtain technology
From advanced countries (developed world)
Universities
Research Centre

Products which are highly specialized

and involve high levels of technology
are usually manufactured in developed
countries.

DEVELOPING AND THIRD WORK COUNTRIES

USUALLY HAVE INDUSTRIES WHICH REQUIRE
LESS TECHNOLOGY AND CAPITAL
INVESTMENTS

Apparel Industry of India

Bicycle Industry in India

FIXED CAPITAL land, construction of factory

building, machinery for processing and social
capital (social services) of the area, including
public housing, school, hospital. It also include
physical infrastructure (e.g. road, railways). Fixed
capital is much more immobile, difficult and
costly to move. This is the reason for
geographical inertia.

WORKING CAPITAL - It
is needed to finance the
costly factory system, to
pay wages, purchase
stock of material,
component parts,
finished product not yet
sold and money (money
capital). Money capital
can be obtained from
investment of
manufacturers, sale of
shares to private

GOVERNMENT DEFINITELY
PLAYS AN INDIRECT ROLE

The clustering of several similar or

related activities at the same location.
Many industries have firms that tend to
agglomerate, that is, locate very close
to one another, leading to geographic
concentration.

AGGLOMERATION LEADS TO
INDUSTRIAL LINKAGES
Industrial Linkages
Locational choice
Continuing operation of firms at given location
Constraint on movement

TYPES OF
LINKAGES
Material Linkages (Tangible)
Process Links
Sub-contract Links
Service Links
Marketing Links
Information Linkages (Nontangible)
Banks, stock-brokers, telephone and
face to face contact between firms

FORMS OF LINKAGES I

FORMS OF LINKAGES II

REASONS FOR
AGGLOMERATION

(External Economies of Scale)

Transport savings

Access to skilled labour

Presence of ancillary services.
Possibility of internal economies
Infrastructure savings
Attract investment
Research and development

INDUSTRIAL
INERTIA/GEOGRAPHICAL
Once a factory has been built on a
INERTIA

particular site, it will tend to remain there

even though the original factors no longer
exist.

It is a very important factor for hindering the

movement of industries.

REASONS FOR INDUSTRIAL

INERTIA
Costs of moving
Presence of a pool of labour
Costly to move a skilled
labour
Costly to train unskilled
labour
Presence of associated
industries
Infrastructure might not be a
available in the new area

FACTORS FOR
DECENTRALISATION

Expansion of firm
Redevelopment of inner cities
Inner city problems which hinder firms

development
Demand for office space in the central
city
Suburbanization (population & market)
Nature of industry
Government Encouragement

SPECIAL ECONOMIC ZONE

(SEZ)
It is a geographical
region that has
economic and other
laws that are more
free-market-oriented
than a country's
typical or national
laws. "Nationwide"
laws may be
suspended inside a
special economic
zone.

India was one of the first

countries in Asia to recognize the
effectiveness of the Export
Processing Zone (EPZ) model in
promoting exports, with Asia's first
EPZ set up in Kandla in 1965. In
order to overcome the
shortcomings experienced on
account of the multiplicity of
controls and clearances; absence
of world-class infrastructure, and
an unstable fiscal regime and with
a view to attract larger foreign
investments in India, the Special
Economic Zones (SEZs) Policy was
announced in April 2000.

The objectives of SEZs can

be clearly explained as the
Generation
following:of additional economic activity
Promotion of exports of goods and services
Promotion of investment from domestic and

foreign sources
Creation of employment opportunities
Development of infrastructure facilities

Currently, there are

about143SEZsoperating throughoutIndia
and an additional634SEZs(as of June
2012) that have been formally/principally

The major incentives and

facilities available to SEZ
developers
include:Exemption
from customs/excise
duties for development

of SEZs for authorized operations approved by the BOA.

Income Tax exemption on income derived from the
business of development of the SEZ in a block of 10
years in 15 years under Section 80-IAB of the Income
Tax Act.
Exemption from minimum alternate tax under Section
115 JB of the Income Tax Act.
Exemption from dividend distribution tax under Section
115O of the Income Tax Act.
Exemption from Central Sales Tax (CST).
Exemption from Service Tax (Section 7, 26 and Second
Schedule of the SEZ Act).

THE
INVESTMENT
DESTINATION
Gujarat emerges to
be an Industrial hub
with Indias most
Industrialized State.
Gujarat pays a 27%
tax of India. With
Vibrant Gujarat
Summits, it is
evident that Gujarat
has the highest
success rate of

WHY BUSINESS IS VIBRANT

IN GUJARAT?
Business is a way of Life and Inherited Entrepreneurial

Spirit
The SEZ Growth engines that can boost
manufacturing, augment exports and generate
employment
SME Backbone of the economy. Sector playing a key
role in shaping the manufacturing industry
PPP Public Private Partnership. A winning combination
for Investments
World class infrastructure in terms of road network and
ports
Government felicitates, encourages investment and
holistic growth
Gujarat is a power surplus state
Least Labour problems in the country

INDUSTRIAL PARKS HAVE

BEEN SET UP

The Industrial Parks Scheme came to existence in

Gujarat in the year 2002. This Scheme is known as
Industrial Parks Scheme 2002 through Private
Agencies. The Industrial Policy of Gujarat emphasize on
creating more opportunities in Industrial, Commercial
and Service Sectors to accelerate the flow of Industrial
Investment. Three types of parks have been set up :
1. Investment Oriented Parks
2. Export Oriented Parks
3. Eco Industrial Parks

PORTS IN GUJARAT
Gujarat State has got the
longest sea coast of
1600km in India.
Other important ports in
Gujarat are thePort of
Navlakhi,Port of
Magdalla,Port Pipavav,
Port ofPorbandar and
the privately
ownedMundra Port.
These help in easy

Kandla Portis one of

the largest ports
serving Western
India.

OTHER FORMS OF
RANSPORT
ROAD NETWORK : Gujarat has a well
developed road network. The Golden
Quadrilateral and East West Corridor pass
through the state.
RAIL NETWORK : Gujarat comes under
the Western Railway Zone of the Indian
Railways. Vadodra Railway Station is the
4th busiest Railway Station in India. It is
situated on the Delhi-Mumbai Link. Gujarat
is well connected to all parts of India
through Rail Network.
AIR LINK : Gujarat has a full-fledged
international airport Sardar Vallabhai Patel
Airport (Ahmadabad). Many domestic and
international flights operate from here. The
state also has several other domestic
airports.

The state has essentially an agrarian economy with a

lower industrial output as compared to other states of
India. A prominent feature of the industrial scenario of
the Punjab is its small sized industrial units. There are
nearly 194,000 small scale industrial units in the state
in addition to 586 large and medium units. Ludhiana is
an important centre for industry.

WHAT LED TO THE DECREASE IN

GROWTH OF INDUSTRIES IN
TERRORISM :
PUNJAB?
The terrorism in the 1980s and 1990s
caused a big dent in the Industrial growth
of Punjab.
In the 1980s there was a chance of a Hero
Honda and Maruti Suzuki plant to be set up
in Ludhiana but due to some circumstances
of terrorism it was cancelled.
Large scale industries have stayed away
from Punjab since then.

POWER :
About 27% of the total energy of the state is provided by theRopar
Thermal Plantwhile the Bhakra Nangal complex provided 20.3% of the
total power for the state and the Guru Nanak Thermal plant at Bhatinda
accounts for about 21% of the energy to the state. Other important
sources of power are the Dehar Power plant (13%), Shanan Power
house at Joginder Nagar (5%), Pong Power project (4%) and UBDC
power houses (2%) Mukerian Hydel Project3%.
Over the years the power production has not kept pace with the
requirement. No new capacity has been added. Apart from this
shortage of coal and lack of water in the Hydel Plants adds to the woes.
Thus, the industry has to face power cuts sometimes even for 2 days
in a week.

SCARCITY OF SUITABLE OF LAND :

Punjab is one of the most fertile regions of the
world. Thus, land prices in the recent years have
gone up drastically. It is not viable to buy vast
amounts of land to set up large scale industries.

LACK OF CONNECTIVITY :
Punjab being a landlocked state doesnt
have a port. Goods need to be
transported long distances by road or rail
before they can be exported. Moreover
proper air connectivity is missing in the
state. Ludhiana being a major industrial

CONCLUSION
The various factors which affect the location of
industry are now known to us. We know that for the
development of our country, we need to develop
and expand large scale industry in our country. We
as Industrial Engineers should make sure that
industries are run sustainably and wherever they
are located, the industries should be sensitive to
the environment and towards the local people
residing in that region.