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.
Contents |
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 Maharashtra 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.
The worst sufferer of this policy was West Bengal, the undivided Bihar (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 Tatas 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
archiv.ub.uni-heidelberg.de/volltextserver/volltexte/2005/5770/pdf/dattas_whole_thesis.pdf