Freight equalisation policy
Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Beyond NCERT
Meaning
The freight equalisation policy (1952-1993) was a subsidy on transporting minerals such as coal and iron ore. Because of it, a factory paid the same price for these minerals wherever it was located. It matters because it removed the natural cost advantage of states that had the minerals.
Example
Without the policy, a steel plant in mineral-rich Bihar/Jharkhand, Odisha or West Bengal would get cheaper raw materials than one near a western port. With the subsidy, factories chose sites near ports and markets instead. As a result, the eastern states industrialised slowly.
Don't confuse with
- Licensing for regional equality: this also tried to shape where industry located, but it pushed units towards backward areas. Freight equalisation ended up hurting the mineral-rich east.
Related concepts
- Industrial licensing
- Licence Raj
- Licensing for regional equality
- Crony capitalism
- Pro-market versus pro-business policy