Freight Equalization Policy's Decades-Long Impact on Regional Disparities Highlighted in Social Media Discourse

A recent tweet by user "Rishi🥥🗽🌐🔰🏙" has ignited discussion around the historical economic landscape of Indian states, specifically referencing Tamil migration to Dharavi and the long-term effects of the Freight Equalization Policy (FEP). The tweet, dated August 15, 2025, asserts that the story of Tamil migration reflects a period when Tamil Nadu was among India's poorest states, a fact "conveniently forgotten" as "BIMARU states want to push the Freight Equalization privilege narrative on Tamil Nadu." This statement brings to the fore a complex history of industrial policy and regional development.

The Freight Equalization Policy, implemented in 1952 and largely phased out by 1993, aimed to standardize the price of essential raw materials like coal, steel, and cement across India, regardless of transportation costs. Its stated goal was to promote balanced industrial development nationwide. However, the policy effectively subsidized the transport of minerals from resource-rich eastern states, such as Bihar (part of the "BIMARU" group, an acronym for Bihar, Madhya Pradesh, Rajasthan, and Uttar Pradesh, denoting economically less developed states), to industrial hubs and coastal regions.

This policy inadvertently removed the natural advantage of mineral-rich states, disincentivizing industries from setting up near raw material sources. Consequently, manufacturing units increasingly gravitated towards states with better infrastructure, port access, and established markets, including Maharashtra, Gujarat, and Tamil Nadu. For instance, while Bihar's industrial output grew significantly in the early post-independence years, the FEP's long-term impact led to a decline in its industrialization, contributing to persistent economic backwardness. Tamil Nadu, with its existing textile industry and strategic coastal location, was able to leverage the policy for further industrial expansion.

Tamil Nadu's economic trajectory has seen a significant transformation since the mid-20th century. While historical data indicates that states like Bihar and Uttar Pradesh had lower poverty rates than Tamil Nadu, Kerala, and Maharashtra in 1960, Tamil Nadu has since emerged as one of India's leading industrialized states. Its economy is now diversified, with strong sectors in manufacturing, IT, and services, consistently ranking among the top states in terms of per capita income and human development indicators.

The migration of Tamils to Mumbai, particularly to areas like Dharavi, began decades ago, driven by economic opportunities. Dharavi, one of Asia's largest informal settlements, became a destination for migrants from various parts of India, including Tamil Nadu, seeking livelihoods in Mumbai's burgeoning economy. This migration pattern reflects the socio-economic disparities and the search for better prospects that characterized India's early post-independence development.

The tweet highlights an ongoing debate about historical policies and their lasting impact on regional economic disparities. The "privilege narrative" from BIMARU states often stems from the perception that policies like FEP disproportionately benefited certain regions at the expense of others, contributing to the current economic gap. This perspective underscores the complex interplay of historical policy decisions, natural resource distribution, and subsequent development trajectories in shaping India's diverse economic landscape.