INDIAN STATE : BIHAR

General Information

Bihar is located in the eastern part of the country (between 83°-30' to 88°-00' longitude). It is an entirely land-locked state, although the outlet to the sea through the port of Kolkata is not far away. Bihar lies mid-way between the humid West Bengal in the east and the sub humid Uttar Pradesh in the west which provides it with a transitional position in respect of climate, economy and culture. It is bounded by Nepal in the north and by Jharkhand in the south. The Bihar plain is divided into two unequal halves by the river Ganga that flows through the middle from west to east.

Fact File

*Source: CSO Estimates / Official Website of Government of Bihar / Economic Survey of Maharashtra, 2005-2006

Climate

The climate of Bihar is a part of the climatic pattern of the Indian subcontinent. It enjoys a continental monsoon type of climate owing to its great distance from the sea.

Seasons and their duration:

• Cold weather season - December to February.
  
• Hot weather season - March to May.
  
• Southwest monsoon - June to September.
  
• Retreating southwest monsoon - October to November

Advantage Bihar

• The Gangetic plain of Bihar, the biodiversity of Bihar, backed by good climate & fertile soil.
  
• Direct access of 46% of country's population having common boundaries with UP, Orissa, Jharkhand and West Bengal and international border with Nepal & NE states with chicken neck.
  
• The state has a strong agricultural base for setting up agro-based industries like agri & food processing units for sugar, jute, tea, etc.
  
• The state has virtual monopoly in production of Litchi, Makhana and Honey.
  
• Fairly motivated and hard working manpower.
  
• The state is capable of producing mushrooms of best quality and in abundant quantity.
  
• Traditional knowledge weavers are available in plenty.
  
• Very close to international silk route.
  
• Producer of tasar, eri and mulberry silk of good quality.
  
• Water resource is available in abundance

Economic Infrastructure

Power

The present power scenario in the state is outlined below (as on September 2006)

The demand and supply scenario in the power sector is as follows (as on September 2006):

A new power policy is on the anvil with the following core components:

• Augment generation and distribution by encouraging private investment.
  
• Bring down average transmission and commercial losses (AT&C) by 3 per annum in the next five years
  
• Stop cross subsidy and recover costs

The state has undertaken a number of reforms to improve upon the power situation in the state. These include:

• SEB is being re-organized into eight companies and the Power Finance Corporation (PFC) has been appointed as consultants for implementation.
  
• State Regulatory Commission is in place and an application has been filed for tariff revision

Roads

The road network in the state is outline below:

• 3629 Kms of National Highways
  
• 3232 Kms of State Highways
  
• 7714 Kms of Major District Roads

Total anticipated expenditure in the major roads sector in the next three years:

• 4-Laning - 11400 Crores (NHAI)
  
• State Highways - 4000 Crores
  
• Major District Roads - 2500 Crores
  
• Total - 17,900 Crores

As for the rural roads, the following works have been taken up:

• Construction of 2400 km of link routes and upgradation of 2000 km of through routes costing Rs. 1416.88 crores under Pradhan Mantri Gram Sadak Yojna.
  
• Construction of 1000 km of link routes costing Rs. 300 crores under Mukhya Mantri Gram Sadak Yojana
  
• Upgradation of 2460 km of through routes costing Rs. 599 crores under state plan.

Railways

Bihar has a fairly good railway network. A few railway routes connecting important places like Muzaffarpur-Samastipur-Barauni-Katihar and Muzaffarpur-Chapra-Siwan have been converted into broad gauge. The main rail junctions are at Patna, Gaya, Muzaffarpur, Katihar and Samastipur, etc.

Finance

Bihar State Financial Corporation (BSFC) is the main state level institution providing term lending facilities to industrial entrepreneurs. Banks have also shown increasing interest in term lending to industrial units. BSFC will be restructured and strengthened to meet the growing financial and mercantile needs of entrepreneurs. The Corporation also undertakes the appraisal of projects coming up in the state with a view to raising money from the capital market (Public/Rights Issues).

Major industries

Agriculture

The production scenario of agricultural sector is outlined below:

A brief profile of a few of the products is given here, in which the state has a comparative advantage.

Maize

The current maize production level in the state is 1.5 million MT (10 per cent of country's production) and the target for 2015 has been set at 4.5 million MT. Maize is grown round the year and the productivity level is higher than the national average. Producers' price of maize in the state is comparable to export parity price making maize internationally competitive. Huge potential exists for the private sector investment with respect to contract farming, industries based on ethanol, corn oil, feed and starch industry. Further, scope is there for export of baby corn from the state.

Sugarcane

The current level of sugarcane in the state is 13.00 million MT and the targeted production by 2015 is 46.72 million MT. Investment opportunities exist in the following segments for the private sector:

• New green field Sugar mills Capacity expansion of existing mills
  
• Ethanol manufacturing
  
• Molasses based alcohol
  
• Cogeneration of power
  
• Bagasse based paper

Litchi

The current level of production in the state is 0.28 million MT and the production target for 2015 has been fixed at 0.5 million MT. Litchi's whole sale price in Bihar is less than that of competing states, giving comparative advantage for domestic and export market. Investment opportunities exist in the following segments for the private sector:

• Contract farming
  
• Export of fresh fruits
  
• Export of processed fruits
  
• Litchi honey

Makhana

Makhana is an aquatic organic crop rich in protein and low in fat content. The present production of Makhana in the state is 0.003 million MT (Bihar contributes 85 per cent of national production) and the target for 2015 has been fixed at 0.050 million MT. Investment opportunities exist in the following segments for the private sector:

• Contract farming
  
• Processing and exports (pure organic based cultivation gives an added advantage to the crop, particularly in the export market)

Mango

The present level of production of mango in the state is 1.4 million MT (13 per cent of all India production) and the target for 2015 has been fixed at 3.0 million MT. Several varieties such as Jardalu, Langra and Krishna bhog are produced in the state. Investment opportunities exist in the following segments for the private sector:

• Contract farming
  
• Export of fresh/processed food
  
• Cold chain

Vegetables

The present level of production of vegetables in the state is 8.60 million MT (9 per cent of all India level) and the targeted production for 2015 has been fixed at
12.4 million MT. Investment opportunities exist in the following segments for the private sector:

• Contract Farming
  
• Processing & export
  
• Cold chain

Honey

The present production capacity of honey in the state is 1300 MT (13 per cent of the all India level) and the target for 2015 has been fixed at 3900 MT. Investment opportunities exist for the private sector in the following segments:

• Processing
  
• Contact farming
  
• Marketing

Aromatic Rice

The present production capacity of honey in the state is 0.015 million MT and the target for 2015 has been fixed at 0.05 million MT. Investment opportunities exist for the private sector in the following segments:

• Contact farming
  
• Modern rice mills
  
• Exports

Sugar Industry

Sugar industry is the largest agro-based industry in Bihar. This industry generates sizeable employment in the farm sector directly as well as through ancillary industries and related activities. It is estimated that about five lakh farmers and their dependents are engaged in the cultivation of sugarcane and approximately another half a lakh unskilled and skilled personnel, including highly qualified and trained technologists are engaged in the sugar industry in the state.

Status of the sugar industry in Bihar (2004-05)

Investment opportunities in sugar and allied industries in Bihar:

• Green field sugar mills
  
• Capacity expansion of existing sugar mills
  
• Ethanol manufacture
  
• Manufacturing of Molasses based alcohol and commercial spirit
  
• Cogeneration of power
  
• Manufacture of bagasse- based paper
  
• Press- mud based organic manure
  
• Engineering units related to sugar industry
  
• Manufacture of sugar- based confectionery items

Incentive package for sugar industry

For new sugar mills:

• Reimbursement of central excise duty on sugar.
  
• Exemption of purchase tax on sugarcane.
  
• Exemption of stamp duty and registration fees on purchase of land.
  
• Grant of 10% subsidy on capital investment (plant and machinery) to a maximum of Rs. 10.00 crores, which ever is less.

For distillery and ethanol units

• Exemption of administrative charge on molasses.
  
• Reimbursement of sales tax (VAT) on molasses.
  
• Exemption of stamp duty and registration fees on purchase of land.
  
• Grant of 10% subsidy on capital investment (plant and machinery).

Setting-up Co-generation Power Units

• Exemption of electricity duty on co-generated power.
  
• Exemption of stamp duty and registration fees on purchase of land.
  
• Grant of 10 % subsidy on capital investment (plant and machinery).
  
• Laying of transmission line from factory to grid station by electricity board.

Food processing industry

Bihar is the leading state in the production of fruits and vegetables. It is the first largest producer of vegetables and second largest producer of fruits in the country.

There exists huge scope of investment in the food-processing sector in the state Private Sector participation is being encouraged in packaging and food processing sectors to ensure better quality. Also, the state welcomes private investment for comprehensive development of tea industry and capital subsidy is available for setting up tea processing units.

Further, there is huge potential for development of farming and processing of medicine (herbal and aromatic plants) in the state on account of natural environment and geographical location of the state. The active participation of private sector and Non Government Organizations is encouraged and incentives are provided under the Industrial Policy.

Textile Industry

Textile sector also offers huge potential to the investors. The state has strong weaving traditions. The total number of weavers in the state is over 90,000. The major locations for the textile industry are Bhagalpur, Gaya, Nalanda, Darbhanga, Madhubani, Siwan and Patna.

Investment Opportunities

• Agro based industries
  
  • Cattle feed
    
  • Jute, hemp, sisal and other fabrics
    
  • Tea cultivation, processing and packaging
    
  • Paper
    
  • Floriculture
    
• Industries based on medicinal and aromatic plants
  
• Sericulture /Tasar
  
• Chemical based industries
  
• Power generating and allied industries
  
• Electronic and computers and IT based industries
  
• Industries based on non-conventional energy
  
• Livestock based industries, such as dairy, poultry, piggery, equipment meat processing, etc.
  
• Industries based on recycling of wastes, eco-friendly raw materials and processes.
  
• Super specialty Health services
  
• Telecommunications and related products
  
• Food processing industry
  
• Tissue culture products
  
• Seeds and planting materials
  
• Foods and Vegetable processing
  
• Bio-technological processes and products
  
• Post Harvest technologies
  
• Tourism
  
• Cold storage
  
• Plastic and Plastic based industries
  
• Pharmaceutical drugs based industries
  
• Leather based Industries
  
• Technical education
  
• Ceramics
  
• Sports Goods
  
• Packaging
  
• Metallurgical industries including power intensive units like induction furnaces, furnaces ferro alloys, oxygen plants, graphite and gas plants and calcium carbide plants.
  
• Textile, hosiery, knitwear
  
• Handicrafts
  
• Natural Gas based industries
  
• Housing fixtures and related industries

Policy Framework

Industrial Incentive Policy 2006

Under the Industrial Incentive Policy- 2006, provisions have been made for granting pre-production incentive of subsidy/exemption from stamp duty and registration fee and post production incentive of grant/exemption for preparation of project reports, purchase of land/shed, technical know-how, captive power generation/diesel generating set, quality certificate, VAT, luxury tax, electricity duty, conversion fee, market fee etc.

With the implementation of this Industrial Incentive Policy- 2006, it is expected that there will be growth in the per capita income of the state as well as the industrial growth.

Strategy of the policy

• Create favorable circumstances in order to establish industries in the State so that among the investors, there may be positive communication.
  
• Bihar Single Window Clearance Act - 2006: To promote all round development of the state and industrial growth rapid clearance procedures for establishing industries, to issue license and certificates, to provide a congenial atmosphere to the investors of Bihar state and in this regard and for other concerned subjects Bihar Single Window Clearance Act - 2006 has been enacted.
  
• Bihar Infrastructure Development Enabling Act- 2006 - To provide for rapid development of physical and social infrastructure in the State and to attract private sector participation and to provide for a comprehensive legislation for designing, financing, construction, operation, maintenance of infrastructure projects, so that administrative and procedural delays are reduced, for identifying generic project risks, Bihar Infrastructure Development Enabling Act, 2006 has been enacted.
  
• In order to simplify the inspection of factories, provision of self-certification will be made.
  
• Industrial growth is adversely affected due to the complicated labour laws. Such labour laws will be made simple and development oriented.
  o Human resources will be developed in such a way, which can promote and create industrialization of high degree. Besides existing different institutions will be strengthened to improve skill.
  
• Land Bank- To meet the requirement of land for industries and development schemes, Land Bank will be established in the state. By this Bank, Land will be made available according to the requirements to different industries and for development schemes.
  o Marketing arrangements will be made for small, tiny, cottage industries, handloom and handicraft.
  
• For the creation of the basic facilities of international level, to enhance capital investment in the industrial areas and invite the private sector for investment and to encourage public private partnership for this purpose.
  
• Development of Infrastructure.
  
• In order to revive sick units, to identify such units and to suggest necessary remedial measures and to prevent sickness by developing a district level monitoring system.
  
• To develop handicraft, handloom, khadi, silk and village industries.

Full text of the policy

Investment Incentives

Pre-Production Incentives

Stamp duty and registration fee: Tiny, small, medium and large scale industries which are to be established in the industrial area / shed and outside the area of the Authority will enjoy the full (100%) exemption in stamp duty and registration fee in lease /sale/transfer. This facility will be granted only for the first time and thereafter will not be granted.

Post-Production Incentives

• Project Report incentive: Reimbursement of the cost incurred in the project report preparation by the industrial units at the rate of 50% subject to a maximum of US$1622.26 will be made available provided, the project report is prepared by any of the firms recognized by the Industry Department. The reimbursement will be made to the unit after commencement of the production.
• Incentive Granted on Land/Shed: The Industrial Units located in Bihar Industrial Area Development Authority / Export Promotion Industrial Park / Food Park / Agri Export Zone would be eligible for the declared incentive / subsidy.
• Financial Assistance for Technical Know how If an entrepreneur obtains Technical Know-how from any recognized National research center / laboratory or institution to establish or to expand his industry, he/she will be reimbursed 30% (maximum Rs. 15.00 lacks) of the fee paid to the Institution/organization for the technical know-how.
• Incentive Grant for Capital Investment on Captive Power Generation/ Diesel Generating Set: 50 percent of the amount spent on plant and machinery in the establishment of Captive Power Generation/Diesel Generating set will be granted to the industry.
  
• New industrial units will be granted relief from payment of electricity duty under the Bihar Electricity Duty Act, 1948 for the generation and for own consumption of electricity from D.G. Set and Captive Power Units.
• Subsidy/ Incentive on VAT will be provided.
  
• 100% exemption in luxury tax for seven years.
  
• 100% exemption in electricity duty for seven years.
  
• 100% exemption in conversion charge.
  
• 100% exemption in market Fee for seven years.
  
• Incentive on quality certification: 75 percent of the cost incurred in obtaining certificate of ISO standard will be reimbursed by the state government.
  
• Several other incentives will be provide to Information technology and handloom sector.

Major Industrial Area

Proposals approved by State Investment Promotion Board

Useful Weblinks

• Official Website of Government of Bihar
  
  
• Bihar Industrial Area Development Authority