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{{Short description|Indian economic policy}}
{{Use Indian English|date=February 2016}}
'''Freight equalisation''' '''policy''' was adopted 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. The policy was introduced in 1952, and remained in force until 1993.<ref name="Nand2007">{{cite book | author=Nand Kishore Singh | title=The Politics of Change: A Ringside View | url=https://books.google.com/books?id=96YxzysAnVUC&pg=PA237 | accessdate=15 February 2013 | year=2007 | publisher=Penguin Books India | isbn=978-0-670-08137-0 | pages=237 }}</ref>

The policy hurt the economic prospects of the mineral-rich states like [[Bihar]] (including present-day [[Jharkhand]]), [[West Bengal]], [[Madhya Pradesh]] (including present-day [[Chhattisgarh]]) and [[Odisha, India|Odisha]], since it weakened the incentives for private capital to establish production facilities in these areas.<ref name="Bank2008">{{cite book | author=World Bank | title=World Development Report 2009: Reshaping Economic Geography | url=https://books.google.com/books?id=ZkDE5CxAqHcC&pg=PA257 | accessdate=15 February 2013 | date=4 November 2008 | publisher=World Bank Publications | isbn=978-0-8213-7608-9 | pages=257 }}</ref> As a result of the policy, businesses preferred setting up industrial locations closer to the coastal trade hubs and markets in other parts of the country.<ref name="Nand2007"/>

== Rationale ==

The freight equalisation concept made "essential" items available at relatively constant prices throughout the country. These items included [[coal]], [[steel]] and [[cement]] among many others. The idea was to promote balanced regional development of industries throughout the country.<ref name="Michael2003">{{cite book | author1=Michael A Toman | author2=Ujjayant Chakravorty | author3=Shreekant Gupta, Rajat | title=India and Global Climate Change: Perspectives on Economics and Policy from a Developing Country | url=https://books.google.com/books?id=_FEmE4wClOcC&pg=PA58 | accessdate=15 February 2013 | year=2003 | publisher=Resources for the Future | isbn=978-1-891853-61-6 | pages=58–}}</ref>

==Results==

Industrialists interested in setting up plants anywhere in the country would get [[coal]], [[iron]] ore, [[aluminium]] etc. at the same price as they used to get in the mineral-rich states. A factory could be set up anywhere in the country and the transportation of minerals would be subsidised by the central government. As a result, there was growth of heavy and middle level-industry outside the mineral-rich regions of the country.

The policy took away the competitive advantage of the eastern parts of the country, and benefited the [[West India|western]], [[South India|southern]] and [[North India|northern]] regions. According to British academic [[Stuart Corbridge]], the policy discouraged the establishment of "resource-processing industries in eastern India, as opposed to the extractive industries, which seem to have imposed on the region a version of the '[[resource curse]]' noted more frequently in [[sub-Saharan Africa]]."<ref name="SanjayJohn2011">{{cite book | author1=Sanjay Ruparelia | author2=Professor Sanjay Reddy | author3=Dr John Harriss | title=Understanding India's New Political Economy | url=https://books.google.com/books?id=_qzdGVwQ_CkC&pg=PA68 | accessdate=15 February 2013 | date=9 March 2011 | publisher=Taylor & Francis | isbn=978-1-136-81649-9 | pages=68 }}</ref>

In the western region, the policy especially benefited the coastal states such as [[Maharashtra]] and [[Gujarat]]. The finance minister [[T. T. Krishnamachari]] also equalised the freight, which greatly benefited the cement manufacturers in the [[South India]]n states, as [[limestone]] and [[Dolomite (rock)|dolomite]] became cheaper to transport from North India.<ref name="SenIndia)2007">{{cite book | author1=Raj Kumar Sen | title=West Bengal today: 25 years of economic development | url=https://books.google.com/books?id=D97sAAAAMAAJ | accessdate=15 February 2013 | date=1 January 2007 | publisher=Deep & Deep Publications | isbn=978-81-7629-984-8 | page = 11 }}</ref> The North Indian areas that benefited from the policy included [[Delhi]], its surrounding districts and [[Punjab, India|Punjab]].<ref name="KNPrasad1995">{{cite book | author=K. N. Prasad | title=India's Economic Problems: Regional Aspects | url=https://books.google.com/books?id=5aeR4-pwPUcC&pg=PA107 | accessdate=15 February 2013 | date=1 January 1995 | publisher=M.D. Publications Pvt. Ltd. | isbn=978-81-85880-74-7 | pages=107 }}</ref>

The sufferers of this policy were the states of [[West Bengal]], [[Bihar]] (including present-day [[Jharkhand]]), [[Madhya Pradesh]] (including present-day [[Chhattisgarh]]) and [[Odisha]]. These states lost their competitive advantage of holding the minerals, as the factories could now be set up anywhere in India. This was not the case in the pre-independence era, when the major business houses like the [[Tata family|Tatas]] and the [[Dalmia Group|Dalmias]] set up industries in [[Bihar]], and most of the engineering industry was located in the state of West Bengal. Even after the removal of the policy in the early 1990s, these states could not catch up with the more industrialised states. In 1996, the [[Ministry of Commerce & Industries (West Bengal)|Commerce & Industry minister]] of West Bengal complained that "the removal of the freight equalisation and licensing policies cannot compensate for the ill that has already been done".<ref name="Aseema2005">{{cite book | author=Aseema Sinha | title=The Regional Roots Of Developmental Politics In India: A Divided Leviathan | url=https://books.google.com/books?id=R81Hix0l980C&pg=PA114 | accessdate=15 February 2013 | year=2005 | publisher=Indiana University Press | isbn=978-0-253-34404-5 | pages=114–}}</ref>

==References==
{{Reflist}}

==Further reading==

* {{cite book | author=Arvind N. Das | author-link=Arvind Narayan Das | title=The Republic of Bihar | url=https://books.google.com/books?id=UHhuAAAAMAAJ | accessdate=15 February 2013 | year=1992 | publisher=Penguin Books | isbn=978-0-14-012351-7}}
* [http://archiv.ub.uni-heidelberg.de/volltextserver/5770/ Centripetal Bias in the Federal Fiscal Relations in India, Growing Regional Disparity and Feeling of Discrimination : A Case Study of West Bengal] by Polly Datta

{{Policies of India}}

[[Category:Government finances in India]]
[[Category:Policies of India]]
[[Category:History of rail transport in India]]

Freight equalisation policy - Revision history

UpdateBot at 00:37, 28 January 2022