Locational Factors for Industries – UPSC

In this article, You will read the Locational Factors for Industries i.e. Factors Influencing the Location of Industries – for UPSC IAS.

Locational Factors

• The location of the industry at a particular place is the result of a number of decisions taken at various levels. There are certain geographical factors that facilitate this decision-making. There are other factors that fall outside the subject matter of geography. The validity or importance of a factor also changes with time and space.
• Many important geographical factors involved in the location of individual industries are of relative significance, e.g., availability of raw materials, power resources, water, labour, markets, and transport facilities.
• But besides such purely geographical factors influencing industrial location, there are factors of historical, human, political, and economic nature which are now tending to surpass the force of geographical advantages. Consequently, the factors influencing the location of the industry can be divided into two broad categories i.e.
  1. Geographical factors, and
  2. Non-geographical factors.

Geographical Factors

Following are the important geographical factors influencing the location of industries.

1. Raw Materials:

• The significance of raw materials in the manufacturing industry is so fundamental that it needs no emphasizing. Indeed, the location of industrial enterprises is sometimes determined simply by the location of the raw materials. Modern industry is so complex that a wide range of raw materials is necessary for its growth.
• Further, we should bear in mind that the finished product of one industry may well be the raw material of another. For example, pig iron, produced by the smelting industry, serves as the raw material for steel making industry. Industries that use heavy and bulky raw materials in their primary stage in large quantities are usually located near the supply of the raw materials.
• It is true in the case of raw materials which lose weight in the process of manufacture or which cannot bear high transport costs or cannot be transported over long distances because of their perishable nature. This has been recognized since 1909 when Alfred Weber published his theory of location of industry.
• The jute mills in West Bengal, sugar mills in Uttar Pradesh, cotton textile mills in Maharashtra, and Gujarat are concentrated close to the sources of raw materials for this very reason. Industries like iron and steel, which use very large quantities of coal and iron ore, losing a lot of weight in the process of manufacture, are generally located near the sources of coal and iron ore.
• Some of the industries, like watch and electronics industries use a very wide range of light raw materials, and the attractive influence of each separate material diminishes. The result is that such industries are often located with no reference to raw materials and are sometimes referred to as ‘footloose industries’ because a wide range of locations is possible within an area of sufficient population density.

2. Power:

• Regular supply of power is a prerequisite for the localization of industries. Coal, mineral oil, and hydroelectricity are the three important conventional sources of power. Most of the industries tend to concentrate on the source of power.
• The iron and steel industry which mainly depends on large quantities of coking coal as source of power are frequently tied to coal fields. Others like the electro-metallurgical and electrochemical industries, which are great users of cheap hydroelectric power, are generally found in the areas of hydropower production, for instance, the aluminum industry.
• As petroleum can be easily piped and electricity can be transmitted over long distances by wires, it is possible to disperse the industry over a larger area. Industries moved to southern states only when hydro-power could be developed in these coal-deficient areas.
• Thus, more than all other factors affecting the location of large and heavy industries, quite often they are established at a point that has the best economic advantage in obtaining power and raw materials.
• Tata Iron and Steel Plant at Jamshedpur, the new aluminum producing units at Korba (Chhattisgarh) and Renukoot (Uttar Pradesh), the copper smelting plant at Khetri (Rajasthan), and the fertilizer factory at Nangal (Punjab) are near the sources of power and raw material deposits, although other factors have also played their role.

3. Labour:

• No one can deny that the prior existence of a labour force is attractive to industry unless there are strong reasons to the contrary. Labour supply is important in two respects
  • (a) workers in large numbers are often required;
  • (b) people with skill or technical expertise are needed.
• Estall and Buchanan showed in 1961 that labour costs can vary between 62 percent in clothing and related industries to 29 percent in the chemical industry; in the fabricated metal products industries they work out at 43 percent.
• In our country, modern industry still requires a large number of workers in spite of increasing mechanisation. There is no problem in securing unskilled labour by locating such industries in large urban centres. Although, the location of any industrial unit is determined after a careful balancing of all relevant factors, yet the light consumer goods and agro-based industries generally require a plentiful of labour supply.

4. Transport:

• Transport by land or water is necessary for the assembly of raw materials and for the marketing of the finished products. The development of railways in India, connecting the port towns with hinterland determined the location of many industries around Kolkata, Mumbai and Chennai. As industrial development also furthers the improvement of transport facilities, it is difficult to estimate how much a particular industry owes to original transport facilities available in a particular area.

5. Market:

• The entire process of manufacturing is useless until the finished goods reach the market. Nearness to market is essential for quick disposal of manufactured goods. It helps in reducing the transport cost and enables the consumer to get things at cheaper rates.
• It is becoming more and more true that industries are seeking locations as near as possible to their markets; it has been remarked that market attractions are now so great that a market location is being increasingly regarded as the normal one, and that a location elsewhere needs very strong justification.
• The ready market is most essential for perishable and heavy commodities. Sometimes, there is a considerable material increase in weight, bulk or fragility during the process of manufacture and in such cases industry tends to be market-oriented.

6. Water:

• Water is another important require­ment for industries. Many industries are established near rivers, canals and lakes, because of this reason. The iron and steel industry, textile industries and chemical industries require large quantities of water, for their proper functioning.

7. Site:

• Site requirements for industrial development are of considerable significance. Sites, generally, should be flat and well served by adequate transport facilities. Large areas are required to build factories. Now, there is a tendency to set up industries in rural areas because the cost of land has shot up in urban centres.

8. Climate:

• Climate plays an important role in the establishment of industries at a place. A harsh climate is not much suitable for the establishment of industries. There can be no industrial development in extremely hot, humid, dry, or cold climates.
• The extreme type of climate of northwest India hinders the development of industries. In contrast to this, the moderate climate of west coastal area is quite congenial to the development of industries. Because of this reason, about 24 percent of India’s modem industries and 30 percent of India’s industrial labour is concentrated in the Maharashtra-Gujarat region alone.
• Cotton textile industry requires a humid climate because thread breaks in dry climate. Consequently, the majority of cotton textile mills are concentrated in Maharashtra and Gujarat. Artificial humidifiers are used in dry areas these days, but it increases the cost of production.

Non-Geographical Factors

Nowadays alternative raw materials are also being used because of modern scientific and technological developments. Availability of electric power supply over wider areas and the increasing mobility of labour have reduced the influence of geographical factors on the location of industries.

The non-geographical factors are those including economic, political, historical, and social factors. These factors influence our modern industries to a great extent. Following are some of the important non-geographical factors influencing the location of industries.

1. Capital:

• Capital or huge investment is needed for the establishment of industries.
• Modern industries are capital-intensive and require huge investments. Capitalists are available in urban centres. Big cities like Mumbai, Kolkata, Delhi, and Chennai are big industrial centres, because the big capitalists live in these cities.

2. Government Policies:

• Government activity in planning the future distribution of industries, for reducing regional disparities, elimination of pollution of air and water and for avoiding their heavy clustering in big cities, has become no less an important locational factor.
• There is an increasing trend to set up all types of industries in an area, where they derive common advantage of water and power and supply to each other the products they turn out. The latest example in our country is the establishment of a large number of industrial estates all over India even in the small-scale industrial sector.
• It is of relevance to examine the influence of India’s Five Year plans on industrial location in the country. The emergence of suitable industries in south India around new nuclei of public sector plants and their dispersal to backward potential areas has taken place due to Government policies.
• The state policy of industrial location has a greater hand in the establishment of a number of fertiliser factories, iron and steel plants, engineering works and machine tool factories including railway, shipping, aircraft and defense installations, and oil refineries in various parts in the new planning era in free India.
• We may conclude by noting that the traditional explanation of a location of the industry at a geographically favorable point is no longer true. Location of the oil refinery at Mathura, coach factory at Kapurthala, and fertilizer plant at Jagdishpur are some of the results of government policies.

3. Industrial Inertia:

• Industrial inertia is the predisposition of industries or companies to avoid relocating facilities even in the face of changing economic circumstances that would otherwise induce them to leave.
• Industries tend to develop at the place of their original establishment, though the original cause may have disappeared. This phenomenon is referred to as inertia, sometimes as geographical inertia, and sometimes as industrial inertia. The lock industry at Aligarh is such an example.
• Often the costs associated with relocating fixed capital assets and labour far outweigh the costs of adapting to the changing conditions of an existing location.

4. Efficient Organisation:

• Efficient and enterprising organization and management is essential for running modern industry successfully. Bad management sometimes squanders away the capital and puts the industry in financial trouble leading to industrial ruin.
• Bad management does not handle the labour force efficiently and tactfully, resulting in labour unrest. It is detrimental to the interest of the industry. Strikes and lock-outs lead to the closure of industries. Hence, there is an imperative need of effective management and organization to run the industries.

5. Banking Facilities:

• The location that has better banking facilities and Insurance are best suited for the establishment of industries.
• The establishment of industries involves the daily exchange of crores of rupees which is possible through banking facilities only. So the areas with better banking facilities are better suited to the establishment of industries.

6. Insurance:

• In the face of changing economic circumstances and local conditions, Insurance facilities are mandatory to avoid any circumstance which would jeopardize the industrial setup.
• There is a constant fear of damage to machines and men in industries for which insurance facilities are badly needed.

Consequences of partition on Indian industries

• As regards industries, the share of Pakistan was negligible, 91% of all industrial establishments comprising 93% of industrial workers having come to India’s share. Some of the important industries like jute paper and Iron and Steel remained totally unaffected. Even among others like cotton textiles, sugar, cement, match, soap, glass, chemicals, woollen and silk mills, the share, of Pakistan was negligible.
• However, the partition affected industries in many other ways. The interdependent relationship between India and Pakistan was largely that of the former as the industrial manufacturer and the latter as the supplier of raw-materials.
• More than 70% of the raw jute of East Pakistan used to find its way to the jute mills at Calcutta; the larger portion of the long and medium staple cotton grown in Sind and west Punjab was supplied to the textile mills of Bombay, Kanpur and Ahmadabad; the paper mills of Calcutta obtained their Bamboo supplies from the forests of EastPakistan.
• In exchange for these and other raw-materials, areas now in Pakistan received consumer goods such as sugar, cotton textiles, Iron and Steel products, leather goods, paper, Cigarettes, coal which had a ready market there. The partition disrupted the free flow of these goods.
• The industries which specialised in processing agricultural raw-materials now became dependent on imported cotton, jute, oil seeds, wool etc. Their power to complete in foreign markets was reduced and their expansion potentialities limited. The partition also led to a sizeable decline in the demand for Indian manufactured articles as Pakistan drifted to other sources of supply.
• Migration of Muslim artisans and skilled workers dealt a severe blow to cottage the small scale industries like glass, metal works, woollen and hosiery concerns of Punjab, Delhi, Rajasthan, and U.P. Persons, displaced from Pakistan, could not make up the deficiency and it took considerable time before new workers were trained in such vocations.
• Yet another effect was with regard to the location-pattern of Industries. In view of the strained relations of the two countries, it became unsafe to locate industries in the border provinces or even in Calcutta. Factories, therefore, began to be shifted to the safety of the interior of the country.
• The impact is summarised in the table below: