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Location of Indian Cement Industry: G. S. Gupta and Kirit Patel
Location of Indian Cement Industry: G. S. Gupta and Kirit Patel
28 Vikalpa
Production Cost and Profit Prospects per cent in 1966. This resulted from the disper-
sion of the industry to other states for high profi-
Cost for any industry is usually classified
tability in these regions. Thus, the cost-profit
into fixed cost and Vdriable cost. Fixed cost
data argue for greater dispersion of the industry
includes cost of land, buildings, machines, etc.,
and for more of it in regions such as Andhra
and variable cost comprises costs of raw
Pradesh, Gujarat, and Mysore.
materials, fuel, labour, transport, etc. Buildings
and machines costs are about the same in diffe-
Management's Interest
rent regions. Land cost varies over regions but
exerts no significant influence on locational deci- The choice of location of a new factory
sions, for it is a small part of the total cost. Vari- to a certain extent depends on the manage-
able cost is significant because it is influenced ment's interest in a particular region. If the man-
by the availability of raw materials and labour, agement has country-wide industrial interest,
transport cost, etc. perhaps this factor would not merit attention
The cost-profit data for the cement industry in location studies. However, if the management
in different regions, for which data are published, has regional or local industrial interest this
in the years 1947, 1955, 1960, and 1966, the factor becomes a decisive one. Both these kinds
latest year for which data are available, are provid- of management's interest are found in the Indian
ed in Table 2. These data are presented in terms cement industry. On the one hand, we have
of percentages of gross ex-factory value of Associated Cement Companies Ltd. (ACC) and
output. In other words, these numbers indicate Dalmia Cement (India) Ltd., whose intersts are
the share in rupees of a particular cost item in country-wide. On the other hand, there are cement
gross output worth Rs. 100. For example, the firms run by state governments, such as Andhra
value of materials consumed was Rs. 37.9 per Cement, Madras Cement, and Orissa Cement,
Rs. 100 worth of gross output in Madras in whose interests are limited to its development
1947. within their own territories. Since South India
The data in Table 2 indicate that while possesses more regional entrepreneurs willing
material cost was lower in Bihar than in Madras to float cement factories at present, the Southern
in all the years, quite the reverse was true about region continues to have more cement factories
fuel cost. On the basis of these costs together, than other regions.
Madras had a slight advantage over Bihar. The
locations! preference of Madras over Bihar is Government Policy
also reflected in the profit rate. Madras, among
all the regions for which individual data are For quarrying of limestone, the cement
available, enjoyed the maximum profit in 1947 industry has necessarily to depend on the govern-
and 1955. Madras was second to Punjab in ment for lease terms. Besides, encouragement
1960, and fourth to Andhra Pradesh, Gujarat, and facilities or discouragement and hindrance
and Mysore in 1966, in terms of profitability. from government do exert their influence on
In 1966, Madya Pradesh had the lowest profit location. In the early days, the then princely
of 16 per cent. During 1960 to 1966 the profit states encouraged the expansion of the cement
rate incresed only marginally in Madras and industry in their territories. Thus, out of eleven
Bihar and very significantly in Gujarat, Andhra factories existing in 1936 at the time of forma-
Pradesh, and Mysore. This might have affected tion of ACC, as many as five factories were in
the location of this industry, but it is to be pointed princely states and in case of one, viz., the Punjab,
out that Madras and Bihar were the two states the Provincial Government was directly inter-
which accounted for 70 per cent of the cement ested in capital and management. Recently, the
production in 1947 but that their share fell to 40 governments have evinced keener interest in
per cent in 1955 to 34 per cent in 1960 and to 30 developing the cement industry in industrially
30 Vikalpa
few selected years, using all the four alternative than unity in all the eight regions on the basis
indicators of the demand for and supply of cement of all the four alternative variables in 1966. This
in India: (a) number of workers employed, (b) indicates that all these eight regions have more
value of fixed capital, (c) gross ex-factory value than their average share of the cement indus-
of output, and (d) value added. The data try. The exact value of this coefficient varies
were drawn from the Central Statistical Organi- between 1.07 in Gujarat on the basis of ex-fac-
zation's publications, viz.. Census of Manufac- tory value of output and 3.49 in Andhra Pradesh
turing Industries (CMI) and Annual Survey of on the basis of value added. A careful study of
Industries (ASI). The coverage in terms of the the numbers in Table 3 reveals that Madhya
percentage of total units which provided data Pradesh ranks the first, Andhra Pradesh the
is different for different regions and in different second and Gujarat the last in terms of the con-
years for data pertaining to all industries. How- centration of cement industry as indicated by the
ever, it is the same for the cement industry. There- LQ computed on the basis of all the four alterna-
fore, to make the results comparable, figures of tive variables. Thus, we conclude that at present
all industries were adjusted to the coverage. The (1965 or 1966) cement industry has more con-
underlying assumption behind the adjustment centration in Madhya Pradesh and Rajasthan than
procedure is that the uncovered group of facto- elsewhere and less concentration in Gujarat
ries has the same size distribution as that of the than elsewhere.
covered group, size being defined in terms of About the locational trends over time, the
number of workers employed, value of fixed results in Table 3 indicate that the concentration
capital, ex-factory value of output, or value both in Madras and Bihar has declined between
added. The computed results for the location 1947 and 1966, the decline being more pro-
quotient are provided in Table 3 and those for nounced in Bihar than in Madras. Concentration
the location coefficient are presented later in also declined in Madhya Pradesh, Punjab, and
Tables 4 and 5. Rajasthan between 1960 and 1965 or 1966.
As expected, the location quotient (LQ) is No unambiguous increase in any region's con-
subject to the base variable used in computa- centration between 1947 or 1960 to 1965 or 1966
tion. For axample, LQ for the cement industry is evident. However, concentration seems to
in Madras in 1947 is 2.64 if the number of wor- have increased in Gujarat during 1960-66.
kers is assumed to represent the demand for This might have been a result of the recent
and supply of cement. It is 2.60 if value of fixed availability of oil fields there. In other regions,
capital is used, 2.14 if ex-factory value of out- viz., Andhra Pradesh and Mysore, there is more
put is used and 2.22 if value added is used as evidence for a decline in concentration than an
the base variable. A careful study of the results increase in concentration over time. Thus, the
in Table 3 would indicate that no definite con- concentration in the cement industry in general
clusions can be drawn about the over or under has declined over time. In other words, there
estimation of LQ by one base variable in compa- was a more even distribution of cement industry
rison to that by other base variables. This means in India in 1966 than in 1947. In short, Madras
that the choice of the base variable is significant and Bihar were the two regions commanding
in the study of industrial location. This article a significant share of the industry in 1947-50,
does not aim to enter into this [definitional and in 1965-66 dominance was divided among
debate and therefore it only provides empirical eight regions.
inputs for those who wish to study this defini- The country-wide concentration of an
tional problem. industry is also examined on the basis of the
The necessary data for computation of coefficient of localization. It has been comput-
LQ are not available for any period after 1966. ed for the years 1960 and 1965, and the results
Therefore, present location means location in are given in Tables 4 and 5, respectively. The
1966. The location quotient is found to be greater localization coefficient, like location quotient,
32 Vikalpa
\ \ \
Table 1 Demand, Capacity
and Production of Cement
in 1971
(Lakh tonnes)
Material Cost Fuel Cost Depreciation Cost Wages, Salaries, Ben., Profit
etc.
Region
1947 1955 1960 1966 1947 1955 1960 1966 1947 1955 1960 1966 1947 1955 1960 1966 1947 1955 1960 1966
Madras 37.9 30.2 36.7 37.8 27.0 19.0 26.6 27.2 5.7 8.1 6.0 4.0 21.8 10.9 10.6 7.9 7.3 36.7 18.5 19.1
Bihar 43.0 40.1 46.5 45.6 22.8 15.8 20.3 19.0 9.1 6.7 5.9 3.7 21 9 12.7 8.5 10.6 3.1 24.5 14.3 16.6
Bombay 35.7 24.2 12.1 12.3 16.7
Andhra Pradesh 41.8 36.9 22.6 21.4 9.8 6.5 10.5 8.2 12.7 23.5
Gujarat 40.0 30.3 31.5 31.1 6.4 5.9 12.5 8.4 6.1 21.3
Madhya Pradesh 33.2 36.8 25.0 22.0 12.5 9.5 12.3 10.4 ;4.5 16.0
Mysore 30.6 33.7 32.8 24.2 10.8 6.6 9.5 8.6 1 3.4 21.2
Punjab 31.0 26.0 6.2 10.1 23.9
Rajasthan 42.0 24.6 7.1 9.7 15.0
Source: Central Statistical Organisation : Census of Manufacturing Industries and Annual Survey of Industries (various issues)
Notes : 1. Blanks indicate that data are not available.
2. Profit data are obtained by subtracting wages, salaries, benefits, etc. from value added.
Table 3 The Location Quotient in Indian Cement
Industry
Region Number of workers employed Value of fixed capital Ex-factory value of output Value added
1947 1955 1960 1965 1966 1947 1955 1960 1965 1966 1947 1955 1960 1965 1966 1947 1955 1960 1965 196
6
Madras 2.64 2.24 2.12 1.58 1.56 2.60 1.17 1.96 1.84 2.00 2.14 2.27 2.21 1.92 2.14 2.22 2.82 2.57 1.70 2.11
Bihar 5.06 3.42 2.36 3.42 3.21 3.06 1.39 1.04 1.29 1.35 4.24 2.57 2.25 2.17 2.11 2.80 1.90 2.28 1.69 1.90
Andhra Pradesh 2.12 1.83 1.73 3.51 2.64 2.05 2.65 2.72 2.51 3.33 3.72 3.49
Madhya Pradesh 3.85 3.38 3.34 3.63 2.03 2.16 3.45 3.47 3.08 3.81 4.92 3.45
Gujarat 1.20 1.25 1.33 1.24 1.95 2.03 1.42 1.57 1.07 0.90 1.74 2.29
Mysore 2.32 1.82 1.67 2.85 3.09 3.45 2.74 2.07 1.97 2.43 1.43 1.54
Punjab 2.89 1.57* 1.79 1.59* 2.65 1.00* 5.42 1.44
Rajasthan 8.83 6.59* 8.56 4.68 12.50 4.77* 12.18 4.64*
*
Note : Blanks indicate non-availability of data.
*The location quotients for 1965 are computed using 1960 figures for the cement industry and 1965 figures for all industries.
\
1. Andhra Pradesh .1034 .0487 .0547 .1383 .0394 .0989 .0952 .0359 .0593 .0889 .0267 .0622
2. Bihar .1377 .0583 .0794 .1639 .1572 .0067 .1784 .0794 .0990 .1633 .0715 .0918
3. Gujarat .1157 .0963 .0194 .0917 .0737 .0180 .1205 .0850 .0355 .0904 .1008 -.0104
4. Madhya Pradesh .1151 .0299 .0852 .1176 .0324 .0852 .0859 .0249 .0610 .0929 .0244 .0685
5. Madras .1534 .0723 .0811 .1145 .0585 .0560 .1598 .0724 .0874 .1874 .0730 .1144
6. Mysore .0855 .0358 .0487 .0946 .0332 .0614 .0775 .0282 .0493 .0716 .0295 .0421
7. Punjab .0641 .0222 .0419 .0385 .0215 .0170 .0754 .0285 .0469 .1035 .0191 .0844
8. Rajasthan .1324 .0150 .1174 .1353 .0158 .1195 .1238 .0099 .1139 .1230 .0101 .1129
9. Kerala, Orissa, and .0927 .1331 -.0404 .1056 .1127 -.0071 .0835 .1138 -.0303 .0790 .0980 -.0190
Uttar Pradesh
10. Rest of India 0 .4874 -.4874 0 .4556 -.4556 0 .5220 -.5220 0 .5469 -.5469
Location Quotient: Florence defined the location quo- the greater is the concentration or localization of the
tient for an industry in a region as the ratio of the corresponding industry in the corresponding region, and
regional proportion of workers employed in that industry vice versa.
to regional proportion of workers employed in all indus- Coefficient of Localization : The coefficient of localiza-
tries. Notationally, it is expressed as tion for a particular industry in the country is defined as
the sum of the positive or negative deviations of the
regional proportion of workers employed in that industry
from the corresponding regional proportion of workers
employed in all industries. Mathematically, it is defined as
37
Vol.1, No.4, October 1976