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LOCATION OF PROJECT
SITE
Wednesday, Dece By: Ashish Juneja
mber 8, 2021
 Need for efficient location
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 Smooth and efficient functioning

 Saves cost and enhances productivity
 Grow, prosper and diversify and provide quality
products

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 When do the need of site arises?
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 When new enterprise is established

 Expansion, decentralization and diversification
 Existing factory is not in position to obtain
approval

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 Steps in enterprise location
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 Accoding to Bethel, Awater and Smith enterprise

location involves three steps:
 Selection of region or general area
 Selection of particular community
 Selection of exact plant site

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 An example to illustrate the location
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 The project:
 Company set up a unit for refining waste oils with
installed capacity of 10,500 KL/Ml. the proposed
issue is to finance the extension programme to
manufacture wax oil, industrial waxes and jellies.
After the proposed extension the capacity will
increase to 13,500 ML/KL.

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 An example to illustrate the location
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(Contd.)
 Location:
 The present unit is in Khopoli Maharashtra, 90 km
from mumbai. It is “C” category backward area.
 The factors favoring location are:
 Easy availability of raw materials
 Proximity of potential market
 Well established road network.
 Easy availability of power, water, labour and infra.

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 An example to illustrate the location
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(Contd.)
 Land and building
 The company is in possession of free hold land at
village honad measuring 10,789 sq. metres.
 As on march 31, 1992 the company incurres an
expenditure of 55 lakhs towards development of
land and infra.
 The existing built up area is 1130 sq. meters
approx. and built up area after expansion will be
1785 sq. meters and contract awarded to M/S
Akcon engineering company.
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 Production channel of enterprise
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 Selecting a general Area
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 Factors to be considered:
 Availability of raw materials
 Availability of skilled and unskilled labour
 Nearness to the source of motive power
 Nearness to market
 Availability of transport facilities
 Nuisance problems
 Suitability of climate

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 Economic size
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 Certiain minimum economic size is to be

considered below which the project is not viable
 Size varies from industry to industry depending
upon nature of product manufactured, complexity
of manufacturing process, factors of production,
particularly capital and labour.

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 Processing Unit
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 The scale of project is examined in keeping in view

technological efficiency, cost of production, size of
targeted market and capital cost.

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 Project Phasing
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 Factors which have important bearing on the

economic size of the project are the cost structure
and availability of infrastructure facilities.
 Economic size is carefully analyses by appraising
financial institution and it is ensured that project is
neither too small or too ambitious.

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 Selection of most economic site
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 According to kimball and Kimbal, the “most

advantageous location si that at which the cost of
gathering material and fabricating it plus the cost of
distributing the finished product to the consumer
will be minimum.”

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 Economic Site
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 Let A and B represenr the two sources of supply of

raw materials. Let C stands for the market place;
and let D stands for the site of factory. If the site of
the factory is located at the market C, then only the
transportation cost of raw materials will have to be
paid. Instead, if the factory site is located either at
A or B, then only the distribution cost of finished
goods is incurred.

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 Economic Site
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 If the site is located at intermediate point D, then

the transportation cost on incoming raw materials
and outgoing finished goods will have to be
incurred. In order to arrive at the final decision for
the most economic site, a comparative statement of
total cost is to be prepared for the alternative site.

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 Govt. Regulation on location of
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units
 The govt. has eased restrictions on location of
industries and announced guidelines for industrial
license applications.
 Ministry of industry issued notification that under new
industrial policy, industrial licensing exemption to all
industries except 18 specified categories.
 As per the guideline the proposed project should be
located within 25km from the periphery of standard
urban area limits of a city with population of more
than a million, as per the 1991 Census.
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 Govt. Regulation on location of
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units (Contd.)
 If the industrial unit is located in area designated as
“industrial area” by state govt. before July 1991, the
restriction of location will not apply.
 Industrial units other than electronics, computer
software or printing, which are to located outside
designated “industrial area” and within 25km limit
would require license.
 Environment, safety, land use, urban planning and
related factors are to be considered for industrial
license.
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 Industrial growth centre scheme
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 Scheme was envisaged in 1988 for establishment of

100 growth centre
The criteria's are:
 Outside 50 kms. Of cities with population above

2.5 million
 Outside 30 kms. Of cities with a population of

above 1.5 million but below 2.5 million.

 Outside 15kms. Of cities with population above

0.75 million but below 1.5 million

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 Objectives of industrial growth
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centre scheme
 To provide best of the infrastructure facilities in
these growth centres nation wide.
 The proximity to rail heads, national or state
highway.
 Access to adequate and dependable sources of
water, power, telecommunications facilities,
educational and health facilities and sufficient land
for the development of housing and for the
promotion of tertiary activities.

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 Environmental problems
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 Arising from conditions of poverty and

underdevelopment.
 Arising as negative affects of very process of
development

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 Vicious circle of poverty
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 Location policy
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 In location of cities of other than cities of more than

one million population there is no requirement of
obtaining industrial approvals from central
government.
 In respect of cities with population greater than one
million, industries other than those of a non polluting
nature such as electronics, computer software and
printing, may be located outside 35km. Of the
periphery of urban areas, except if they are located in
designated industrial area, prior to 25.07.1991.
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