The promoters of an industrial unit are confronted with the problem of choosing the site after deciding the area of location of plant. While choosing the site, the following factors should be taken into consideration:

(i)    Site is well connected with various modes of transport.

(ii)    Raw materials are available easily.

(iii)    There are facilities for disposal of polluted water and other waste materials, if any.

(iv)    The site has good surroundings. There should be no congestion of traffic.

(v)    The size of the plot has a sufficient scope for expansion.

(vi)    Municipality rules and regulation allow the construction of building suited to the plant.

(vii)    Labour is easily available.

(viii)    Certain essential service organizations like post office, bank and warehouse exist near the site.

The guiding principle in the fixation of location for the plant is that is must result in the lowest unit cost in producing and distributing a product. For purpose, industrialists will determine and compared the total cost per unit of product at various sites. The elements of total cost are transportation costs of material and fuels, cost of power and water, cost of plant site and building, rates and taxes, and labour and administrative costs. Besides these economic factors, there are other considerations which are the matter of judgment rather than mathematical calculation. For instance, personal or historical factors may compel an industrialist choose a particular or historical factors may compel an industrialist to choose a particular site. Sometimes, a sub-optimum site may be chosen because no other site is available. The industrialist may not bother much about the above mentioned factors when he decides to buy a running plant. Thus, non-economic considerations have also an important impact on the choice of a particular site.

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