Special category status only solution for Bihar

It is presumed that the industrial development in Bihar is hampered by lack of investments. Is it because of ‘unproductive’ government policies or an unpredictable law and order situation? And how to increase the flow of investment in the state? In order to find out answers to all such questions and debate these issues, Business Standard Hindi recently organised a roundtable in Patna.

The seminar was attended by various small and medium entrepreneurs from the state. Chief Minister Nitish Kumar, while participating in the seminar, reiterated his earlier demand that the state should be accorded the special category status. He said this would provide a much-needed boost to the industrial development of the state.

The chief minister also stated that most of the power plants and mines had landed up in Jharkhand after the bifurcation of Bihar in November 2000. Whereas Bihar still struggles every year with natural calamities such as floods and drought.

Nitish Kumar stressed that awarding the special category status to Bihar would result in benefits such as reduced excise and income-tax and this should attract industrial houses to set up their ventures in the state. Special category states shell out only 10 per cent of the total funding for central-sponsored projects, whereas the remaining 90 per cent is made available through central government grants. An increase in the number of projects and industrial ventures will provide better employment opportunities and increase per capita income of the state.

The chief minister clarified that the procedural issues were not a deterrent as the state already had a single-window approval system managed by the State Investment Promotion Board (SIPB). While stating that governance in the state had improved, the chief minister also stressed that the law and order situation was not a major area of concern as perceived by certain industrial segments. He also claimed that the law and order situation in Bihar was much better than some other states. Some of the participants in the roundtable were also of the view that the law and order situation in the state had improved in the last few years.

Yet the industrial development in the state has not picked up. The chief minister blamed the Centre for the sluggish pace of industrial development. He cites an example that if a thermal power plant is to be set up in the state, it requires coal linkage but the Centre is not very forthcoming in providing the linkage, which discourages investors in the sector. The state is already struggling with severe power shortage, with production less than half of the demand. Even after getting an in-principle approval for setting up various power plants, nothing concrete has happened due to the coal linkage issue.

The chief minister showed dissatisfaction in the issues related to sugarcane industry. He mentioned that Centre’s ethanol policy was not clear. Before independence Bihar had 20 per cent share in the total production of sugarcane which now has reduced to less than 3 per cent. Although Bihar has all the favourable conditions for sugar cane production, due to lack of concrete policy sugar cane in no longer considered a profitable crop.

Some of the entrepreneurs attending the seminar pointed out that banks in the state were not very forthcoming in providing loans. Banks had to disburse Rs 21,000 crore in a financial year, whereas only Rs 8,000 crore were actually disbursed. The state government has instructed the banks to increase the credit-deposit ratio to 40 per cent.

The seminar was organised at the Maurya hotel under the series ‘Samriddhi’. It was also attended by Deputy Chief Minister Sushil Kumar Modi. Shaibal Gupta of the Asian Development Research Institute (ADRI), Suresh Gurumani of SKS Microfinance and Satyajit Singh of the Confederation of Indian Industry’s Bihar unit were part of the discussion panel.