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Following are the considerations under this factor:
- Availability of Raw material:
Any manufacturing unit is engaged in the conversion of raw material into finished products, it is very essential that it should be located in a place where the raw material is available in Abundant form so as to reduce the transportation cost.
Eg: Sugar Industries in U. P. & Bihar.
Steel industries in Bihar, West Bengal, M. P.
Paper mills at Dandeli.
Sandal wood oil factory Shimoga.
Vijayanagar steel plant at Donimali
Raw materials are of two types.
- Gross materials or weight losing
- Pure materials or non weight losing
In the case of weight losing raw materials the transportation cost of raw material is more than that of finished goods from factory to the market i.e., weight losing materials are those which lose weight during conversion. Eg. Iron ore, Sugarcane, coal, timber etc.,
On the other hand non-weight losing materials are those which will not lose weight during the conversion, but instead get added to the weight. Eg. Textiles.
- Nearness to the market:
As the goods are produced for sale, it is very essential that the factory should be located near their market. Merits in this respect are
- Reduced Transportation cost.
- Ability to adjust the production programme to suit the likes and dislikes.
- Ability to render prompt service to customers.
- Execute replacement orders without delay.
- Availability of power:
Power is essential to move the wheels of an Industry. Coal, electricity, oil and natural Gas are the sources of power. If coal is used for power the unit should be near the coal fields. Eg. Jamshedpur in India. Electricity is maximum extent used in the industries to carryout various mechanised operations. Electricity as a source of power has become very significant in modern industries, because of ease in handling, its cleanliness, flexibility and cheapness. In fact it’s emergence as a source of power has reduced the importance of coal as a natural fuel. Hence the plant locations must ensure a regular supply of power.
Transport Facilities:
While making the study of a location an entrepreneur consider the question of the availability of Transport facilities. These are most essential for a factory. A place which is well connected by Rail, Road and Water transport is ideal for plant location. But if a plant is located at Backward area, should provide the Transport facility.
Climatic Conditions:
Suitable climatic conditions are also essential for an industry. Thus climate has its own importance in the location of the plant because of two reasons.
- There are certain industries which because of nature of production require particular climatic conditions. Humid climate for cotton textiles and jute. So such industries must be located where abundant water supply is ensured thus textile industries are concentrated in Bombay, Jute industries in Ahmedabad. If such conditions are not available artificial arrangements must be made. Any way it is an expensive one.
- Climatic affects labour efficiency and such places do not attract industries. It is for this reason that little industrial activity is found in tropical and polar regions.
Government Policy :
The influences of Government policies and programmes on Plant location is apparent in every country. Particularly in the planned economy like ours. In the name of many regional development many backward regions in India have been selected for the location of new industries. Textile units in Rajasthan, Orissa, Assam, Punjab Sugar factory distilleries in Karnataka, Maharastra, Tamilnadu, Steel rolling mills in Assam, Madhya Pradesh, Kerala Type and tube, electrical lamps in Kerala Government is the influencing factor in plant location in number of ways. Some of these are:
- Licensing policy
- Freight rate policy.
Competition Between States :
Various states offer investment subsidies and sale tax exemptions to new units. In addition there are incentives.
West Bengal – provides interest free loans.
Orissa - Entire cost will be given
Tamil nadu, Haryana – 50% subsidy
The owners of the factories will certainly consider the incentives.
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