1. Availability of raw material: As far as possible the site selected should be near the source of
raw materials so that cost of transportation can be minimized and storing cost can be reduced
especially when the raw material is heavy and bulky or cheap but looses a good amount of
weight during processing. For example most of the iron and steel industries are situated in
Orissa and Bihar, Paper industries in Ballarpur due to availability of raw material in these
areas.
2. Availability of labour: Available of right kind of labour in required numbers of reasonable
rates is also deciding factor in site selection. Unskilled labours are amply available at major
industrial areas and rural areas but however firms requiring skilled labour be situated near the
urban industrial area.
3. Climatic condition: Climatic conditions largely affect certain production processes and also
the efficiency of employees. For example textile industries required moist climate due to
which these types of industries are situated near Ahmadabad and Mumbai; similarly Tea and
Coffee near Assam.
4. Proximity of market: Market is another important factor affecting site selection. Industrial
units using raw material should be located near the markets to serve the customer with
minimum service cost.
5. Transport and communication facilities: While selecting the site, adequate transportation
facilities should be considered. The optimum site is the site which is well connected by various
modes of transportation.
6. Availability of water: Water is required for drinking and sanitary purpose of all industries.
Therefore, clean and adequate water should be available near the site.
7. Availability of power and fuel: All industries require power and fuel to run the prime movers.
Therefore, the site selected should have these facilities available at cheaper rate.
8. Legal Aspects: Local bye laws, taxes etc. are also important because they directly reflect in
total cost. So while selection, it should also consider legal aspects.
9. Amenities and recreational facilities: Facilities like schools, hospitals, garden, and play
grounds should also be needed for employee and their family.
10. Scope of Future expansion: Site selected should be in such a way that a plenty of land
other facilities must be available for future expansion.
11. Community attitude : Mindset of the local people is also important, many times they
oppose the work.
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