Freight equalization policy
Encyclopedia
Freight equalization policy was adopted in 1948 by the government of India
to facilitate the equal growth of industry all over the country. This meant a factory could be set up anywhere in India and the transportation of minerals would be subsidised by the central government.
and Gujarat were the greatest beneficiaries and so were Delhi
and its surrounding districts. Industrialists interested in setting up plants anywhere in the country––Maharashtra
, Gujarat, Delhi
etc.––would get coal
, iron
ore, aluminium
etc. at the same price as they used to get in Bihar
(now Jharkhand
), West Bengal, Chhatisgarh or Orissa
. A factory can be set up anywhere in the country and the transportation of minerals would be subsidised by the central government.
(now Jharkhand
hewed out from it) and to some extent Orissa
and Madhya Pradesh
(now Chhatisgarh carved out from it). West Bengal and Bihar
’s huge competitive advantage of holding the minerals got destroyed as now factories were set up everywhere else but in these states. This was not the case in the pre-independence era when Tata
s and Dalmias etc. had to come and set up industries in Bihar
and most of the engineering industry was located in the state of West Bengal. The freight equalisation policy continued to destroy states like West Bengal and Bihar
for about half a century.
http://archiv.ub.uni-heidelberg.de/volltextserver/volltexte/2005/5770/pdf/dattas_whole_thesis.pdf
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
to facilitate the equal growth of industry all over the country. This meant a factory could be set up anywhere in India and the transportation of minerals would be subsidised by the central government.
Results
The policy resulted in the growth of heavy and middle level industry in the post-independence years outside the mineral-rich regions of the country. The coastal states of MaharashtraMaharashtra
Maharashtra is a state located in India. It is the second most populous after Uttar Pradesh and third largest state by area in India...
and Gujarat were the greatest beneficiaries and so were Delhi
Delhi
Delhi , officially National Capital Territory of Delhi , is the largest metropolis by area and the second-largest by population in India, next to Mumbai. It is the eighth largest metropolis in the world by population with 16,753,265 inhabitants in the Territory at the 2011 Census...
and its surrounding districts. Industrialists interested in setting up plants anywhere in the country––Maharashtra
Maharashtra
Maharashtra is a state located in India. It is the second most populous after Uttar Pradesh and third largest state by area in India...
, Gujarat, Delhi
Delhi
Delhi , officially National Capital Territory of Delhi , is the largest metropolis by area and the second-largest by population in India, next to Mumbai. It is the eighth largest metropolis in the world by population with 16,753,265 inhabitants in the Territory at the 2011 Census...
etc.––would get coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
, iron
Iron
Iron is a chemical element with the symbol Fe and atomic number 26. It is a metal in the first transition series. It is the most common element forming the planet Earth as a whole, forming much of Earth's outer and inner core. It is the fourth most common element in the Earth's crust...
ore, aluminium
Aluminium
Aluminium or aluminum is a silvery white member of the boron group of chemical elements. It has the symbol Al, and its atomic number is 13. It is not soluble in water under normal circumstances....
etc. at the same price as they used to get in Bihar
Bihar
Bihar is a state in eastern India. It is the 12th largest state in terms of geographical size at and 3rd largest by population. Almost 58% of Biharis are below the age of 25, which is the highest proportion in India....
(now Jharkhand
Jharkhand
Jharkhand is a state in eastern India. It was carved out of the southern part of Bihar on 15 November 2000. Jharkhand shares its border with the states of Bihar to the north, Uttar Pradesh and Chhattisgarh to the west, Orissa to the south, and West Bengal to the east...
), West Bengal, Chhatisgarh or Orissa
Orissa
Orissa , officially Odisha since Nov 2011, is a state of India, located on the east coast of India, by the Bay of Bengal. It is the modern name of the ancient nation of Kalinga, which was invaded by the Maurya Emperor Ashoka in 261 BC. The modern state of Orissa was established on 1 April...
. A factory can be set up anywhere in the country and the transportation of minerals would be subsidised by the central government.
Criticism
The worst sufferer of this policy was West Bengal, the undivided BiharBihar
Bihar is a state in eastern India. It is the 12th largest state in terms of geographical size at and 3rd largest by population. Almost 58% of Biharis are below the age of 25, which is the highest proportion in India....
(now Jharkhand
Jharkhand
Jharkhand is a state in eastern India. It was carved out of the southern part of Bihar on 15 November 2000. Jharkhand shares its border with the states of Bihar to the north, Uttar Pradesh and Chhattisgarh to the west, Orissa to the south, and West Bengal to the east...
hewed out from it) and to some extent Orissa
Orissa
Orissa , officially Odisha since Nov 2011, is a state of India, located on the east coast of India, by the Bay of Bengal. It is the modern name of the ancient nation of Kalinga, which was invaded by the Maurya Emperor Ashoka in 261 BC. The modern state of Orissa was established on 1 April...
and Madhya Pradesh
Madhya Pradesh
Madhya Pradesh , often called the Heart of India, is a state in central India. Its capital is Bhopal and Indore is the largest city....
(now Chhatisgarh carved out from it). West Bengal and Bihar
Bihar
Bihar is a state in eastern India. It is the 12th largest state in terms of geographical size at and 3rd largest by population. Almost 58% of Biharis are below the age of 25, which is the highest proportion in India....
’s huge competitive advantage of holding the minerals got destroyed as now factories were set up everywhere else but in these states. This was not the case in the pre-independence era when Tata
Tata family
The Tatas are a wealthy Parsi family in India. Originally a priestly family in Navsari, they have been active in industry and philanthropy since the nineteenth century...
s and Dalmias etc. had to come and set up industries in Bihar
Bihar
Bihar is a state in eastern India. It is the 12th largest state in terms of geographical size at and 3rd largest by population. Almost 58% of Biharis are below the age of 25, which is the highest proportion in India....
and most of the engineering industry was located in the state of West Bengal. The freight equalisation policy continued to destroy states like West Bengal and Bihar
Bihar
Bihar is a state in eastern India. It is the 12th largest state in terms of geographical size at and 3rd largest by population. Almost 58% of Biharis are below the age of 25, which is the highest proportion in India....
for about half a century.
Further reading
- Arvind N. Das, The Republic of Bihar, Penguin Books, 1992, ISBN 0140123512
http://archiv.ub.uni-heidelberg.de/volltextserver/volltexte/2005/5770/pdf/dattas_whole_thesis.pdf