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| 'Pvt investment in Bihar not possible without tax sops' | | Q&A: Shaibal Gupta, Economist and Member Secretary, Asian Development Research Institute, Patna |
| Kailash Nautiyal / Jan 02, 2010, 00:45 IST |
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Although there is an overwhelming demand for a ‘special category’ status for Bihar, the main challenge before the state government is to build a functioning state structure, says Shaibal Gupta, economist and member secretary of the Asian Development Research Institute, Patna. In a conversation with Kailash Nautiyal, he said though other states might also raise the ‘special category’ issue, one should not forget that it was Bihar which had subsidised the entire post-Independence industrialisation, by allowing its mineral resources to be taken outside through a ‘freight equalisation’ policy. Excerpts:
Chief Minister Nitish Kumar has been demanding a special category status for his state. Why should the state be given this status? Is it a fit case?
Bihar is one of the poorest states of the country. It was disadvantaged even when ‘state-centric’ strategy was at the height of the economy. The disadvantage was not removed through the instruments of the central government investments. With the formalisation of the ‘market-centric’ strategy, the possibility of private sector investment in the state is not possible without tax incentives. It is only possible if the state is placed in the ‘special category status’. The status is granted to states based on two sets of indicators. On one hand, according to the Ministry of Commerce and Industry, the four parameters identified are geographical isolation, inaccessible terrain, poor resource base and remoteness to larger market, and poor infrastructure. On the other, according to the Planning Commission, the indicators are hilly and difficult terrain, low population density, strategic location along the borders with neighbouring countries, economic and infrastructural backwardness, and non-viable nature of state finance. On all counts, except in the second parameter of the Planning Commission — relating to low population density — Bihar deserves to be granted the special category status.
Other states may also raise similar demand. In that case, what is your opinion?
It is possible that other states may raise the issue but one should not forget that Bihar subsidised the entire post-Independence industrialisation of the country, by allowing its mineral resources to be taken outside through the ‘freight equalisation’ policy. It not only failed to trigger industrialisation within the state but it also subsidised the transportation to other states. According to one estimate, Bihar was subjected to a loss of Rs 1,12,812 crore in the steel sector on account of ‘freight equalisation’ in the post-1947 period.
The chief minister alleges that the central government is discriminating against the state government. If so, how?
The central government has been discriminating against us historically. The freight equalisation policy adopted in 1948 practically robbed us. Bihar always received the lowest per capita Plan and non-Plan grants. Ironically, when Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, was visiting Bihar, the Union Cabinet had given a bonanza of Rs 8,000 crore to the Bundelkhand region of Uttar Pradesh. The central government even failed to reimburse the expenditure incurred on flood and drought, with which the state is regularly afflicted.
According to media reports, nationalised commercial banks operating in Bihar have a gigantic task of meeting the target of loan disbursement as part of the annual credit plan during 2009-10 since only 37 per cent of the target has been achieved till the end of September. Will they be able to achieve the target?
The Annual Credit Plan is a modest target in Bihar unlike in other states of the country. Even the modest target is not achieved. This indicates the callous attitude of bank officials in matter of loan disbursement. I don’t think it will be possible to achieve the target.
The total deposit made within the state in various nationalised banks was said to be around Rs 93,000 crore till September-end, while only Rs 30,000 crore had been credited to the people concerned. Where did the banks invest the remaining amount?
The credit deposit ratio in Bihar is very low — at 32 per cent. Through the instrument of the banks, there is a flight of capital from the state. Instead of investment in the state, our surplus is being used elsewhere.
Is it very difficult to get loans from the banks?
It is almost impossible to get loans from the bank, specially related to commercial and industrial ventures. There is an unspoken embargo in this matter. In contrast, if somebody wants to avail consumer loan, there is no problem. In a state like Bihar, commercial banks act as a financial lubricant to trigger economic activity.
What is the position regarding cane and ethanol?
In the matter of cane and ethanol, Bihar has a natural advantage. Yet the central government policies act a fetter to develop this sector. The central government has put unilateral ban in the exclusive production of ethanol. It has to be linked with sugarcane production. On the other hand, faulty policy of procuring sugarcane acts as a hindrance to the industry. The sugarcane industry was protected to give fillip to this sector. However, the import of sugar acted as a great deterrent to this sector.
What are the main economic and social challenges before the present state government?
The main challenge before the state government is to build a functioning state structure, where inclusion is in-built. This is not possible without banishing last vestiges of feudalism. This would entail intervening massively in the land management exercise, which would accordingly demand for updating of land records, consolidation of holding and also distribution of surplus land, if any. Without land management, in a substantive manner, there will not be any drop in the criminal and civil cases, which bring severe strain on the state system. No state in the country has developed without land management effort.
What is the atmosphere of education in the state? Is the educational infrastructure sufficient? How to check student migration to other states?
The atmosphere in the realm of education needs to be improved substantially. There is a need to give emphasis on the forward and backward linkages of education. Since the induction of the present government, a number of educational institutions have been established in the faculty of law, management, medical and engineering. There was a massive recruitment of school teachers. However, the quality needs to be taken care of. The educational infrastructure needs to be improved substantially, along with quality education. Only then the migration of students can be reduced. The proper educational endowment will ensure a ‘knowledge revolution’ in Bihar.
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