Solution:

What is the Policy of Industrial Location?

• The industrial location may be, controlled by the Government of a country by adopting a ‘two-fold approach’.

• The first fold consists of positive measures to encourage the establishment of industries in certain areas and the second fold relates to negative measures to discourage the establishment of industries in certain other areas.

Positive Measures:

• The positive measures include incentives given to industries being established in certain areas.

• In general, to ensure balanced regional development of the country, the positive measures are more effective than the deterrents.

• The incentives and facilities provided by the Government may include the following:

  • (i) Provision of basic infrastructures like transport and communication network, water, power, fuel, etc. in backward regions.

  • (ii) Provision of socio-economic amenities like education, health, recreation, training, and marketing facilities for local industries with a view to develop backward areas.

  • (iii) Granting of tax concessions to industrial units established in specified backward areas.

  • (iv) Granting or subsidies: The subsidies may be direct as well as indirect. Direct subsidies may take the form of subsidized prices, supply of raw materials, tools, and equipment at concessional prices, etc.

    Indirect subsidies may be in the form of reducing, the cost of certain services or to offset the effect of unfavorable factors in industrially backward areas.

    For example, a transport subsidy, which consists of a grant of 50 percent of the transport cost on raw materials is given to industrial units established in the hilly areas of Assam, Jammu, and Kashmir, Meghalaya, Nagaland, Manipur, Tripura, etc.

  • (v) Assurance by the Centre of State Government(s) to buy the finished products of the industrial units set up in backward parts of the country.

  • (vi) Provision of finance at concessional rates of interest to industrial units established in backward districts.

  • (vii) Issue of licenses liberally and on a preferential basis for setting up plants in backward regions.

  • (viii) Establishment of industrial estates in industrially backward regions.

    The The main purpose of creating such states is to enable a large number of small scale units to have the advantage of common services and facilities provided by the Government.