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Investment Climate in

Bihar

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BIHAR PAGE 3

Table of Contents

EXECUTIVE SUMMARY.......................................................................................................... 4

BIHAR - SELECT INDICATORS ........................................................................................... 6

ECONOMIC OVERVIEW OF THE STATE ........................................................................ 7

ECONOMIC PERFORMANCE ............................................................................................. 7

PEOPLE - ECONOMIC PROSPERITY ................................................................................. 7

INDUSTRIAL PERFORMANCE ............................................................................................ 8

INVESTMENTS IN BIHAR ...................................................................................................... 9

LABOUR FORCE ...................................................................................................................10

INFRASTRUCTURE ...............................................................................................................10

LAND ........................................................................................................................................10

EDUCATIONAL INFRASTRUCTURE ..............................................................................11

MEDICAL AND HEALTHCARE FACILITIES ...................................................................11

INFRASTRUCTURE FOR SAVINGS & BORROWINGS...............................................11

TRANSPORT INFRASTRUCTURE ....................................................................................12

POWER .....................................................................................................................................12

TELECOMMUNICATION ....................................................................................................13

INDUSTRIAL INFRASTRUCTURE ....................................................................................13

POLICY FRAMEWORK ........................................................................................................14

KEY NODAL AGENCIES ......................................................................................................15

KEY INDUSTRIES AND PLAYERS ......................................................................................16

AGRO–BASED ........................................................................................................................16

FOOD PROCESSING ............................................................................................................17

TEXTILE (HANDLOOM & SILK) .......................................................................................18

LEATHER INDUSTRY ............................................................................................................18

ENGINEERING INDUSTRY .................................................................................................18

MINES AND MINERALS .......................................................................................................19

IT AND COMMUNICATION .............................................................................................19

PETROLEUM PRODUCTS ...................................................................................................19

DOING BUSINESS IN BIHAR .............................................................................................20

COST ESTIMATES ..................................................................................................................21

CONTACT INFORMATION ...............................................................................................22

APPENDIX ...............................................................................................................................22

A report by ICRA for IBEF

‘Investment climate’ is a broad concept, encompassing all the factors affecting business decisions, including profi tability and where to locate plants and other units. A good investment climate provides opportunities and incentives for fi rms to invest productively and create jobs, thus playing a key role in ensuring sustained growth and poverty reduction.

Factors infl uencing investment climate include: • Availability and ease of use of factor inputs such as land and

labour;• Availability of adequate physical and social infrastructure,

such as power, telecom, urban infrastructure, water supply, hospitals, and educational institutions;

• Governance and regulatory framework in terms of rules and regulations governing entry, operation, and exit of fi rms, sta-bility in regulation, integrity of public services, law and order and investment facilitation; and

• Provision of incentives and access to credit.

The state of Bihar is situated in the eastern part of India with the Himalayan nation of Nepal to its north and the states of West Bengal, Uttar Pradesh and Jharkhand fl anking each of the other sides. Bihar is the land of origin of religions like Buddhism and Jainism. Patna, the present day state capital, traces its history to the erstwhile capital city of Patliputra of Emperor Ashoka.

The state has an area of 94,163 sq km and is home to about 8 per cent of India’s population. Its geography is varied – north-ern Bihar is mostly level tract and part of the Gangetic plains, while southern Bihar is wooded and hilly. The state has fertile soil, well-irrigated by rivers, as well as forest wealth. Present day

Bihar is a result of the bifurcation of erstwhile Bihar and the creation of the state of Jharkhand in 2001, which also took away the majority of mineral rich areas as well heavy industrial units. Thus, not surprisingly, agriculture is a prominent component of the economy of Bihar, employing over 84 per cent of the state’s workforce.

The Gross State Domestic Product (GSDP) for Bihar in 2005-06 was $13.4 billion. The average annual growth rate of GSDP between 1999-00 and 2005-06 was 6.6 per cent. The per capita income of the state at $139 in 2004-05 was much below the national average. Bihar has a mix of industries ranging from agro-based (food pro-cessing, silk and tea) to leather and non-metallic minerals, though dominated by the small scale sector. Food, beverages, tobacco and petroleum products account for more than 85 per cent of the total industrial income. The state contributes about 10 per cent of India’s common fruit and vegetable output, but less than 1 per cent of processed output.

The state is committed to create an investment climate condu-cive for private sector participation. With its Industrial Incentive Policy 2006, the state initiated power sector reforms, one-time settlement schemes, creation of special economic zones (SEZs), revival of sick industrial units and other measures to attract investments. Thrust areas also include promotion of specifi c industries, in particular agro-based industries (food processing, jute, sugar and horticulture) since they are based on the state’s factor advantages, as well as other industries like IT and enter-tainment.

Executive Summary

BIHAR PAGE 5

Another initiative alongside the Industrial Incentive Policy 2006 was the Single Window Clearance Act, 2006. It aims at speeding up the clearances required for implementation of industrial and other projects and ensures single point clearances to promoters for early commercial production of such projects. The initia-tive covers various nodal agencies and supervisory bodies with clearly defi ned roles and responsibilities.

In parallel, the state is working on enhancing industrial infra-structure as seen in projects such as Agro-Park, Air Cargo Complex and Inland Container Depot. The state has a well developed rail network, and is working on enhancing its roads as well as upcoming inland waterways network. Telecom (fi xed line and mobile) is developing rapidly, while power – grossly under-invested till recently – is seeing a huge infl ow of funds to address demand shortage. Bihar is below national averages on various health and social indicators (life expectancy, literacy etc), and gaps in its social infrastructure are also starting to be addressed – by fi lling vacancies in educational institutions, inviting private participation in higher and technical education as well as fi nancial support programmes for healthcare.

Since the onset of the Industrial Policy regime and Single Win-dow system, the State Investment Promotion Board has ap-proved over 100 proposals worth over $8.6 billion. The propos-als cover infrastructure sectors, the thrust industries as well as others like healthcare and hospitality. As of March 2007, projects worth $2.7 billion were under implementation.

stment Climate in Bihar

Capital Patna

International airport Patna

Land and Climate

Area (sq km) 94,163

Climate

Summer (March to May)

Rainy season (June to October)

Winter (November to February)

Rainfall (millimetres) 1,205

Main rivers Ganga, Saryu, Gandak, Bagmati, Koshi, Sone, Punpun, Phalgu

Districts 38

Number of villages 45,103

Number of urban agglomerations 9

Number of towns 130

People

Main religion Hinduism

Population (in millions) (2001 Census) 82.88

Density of population 880 per sq km

Literacy rate (%) 47.5

Male 60.3

Female 33.5

Offi cial languages Hindi, Urdu

State’s share in India’s population 8.1%

Birth rate (per thousand persons) 31

Death rate (per thousand persons) 10.5

Infant mortality rate (per thousand live births) 61

Industry

Major Industries: Agro-based, Food processing, Mining, Oil refi nery,

Textiles, Leather and Miscellaneous Engineering

Bihar - Select indicators

BIHAR PAGE 7

The present state of Bihar is the result of the bifurcation of the erstwhile larger Bihar on 15th November 2000, resulting in the creation of the new state of Jharkhand. Bihar today has an area of 94,163 sq km and a population of 82.88 million (2001 census). It is the third largest state of India in terms of population. Bihar accounts for 8.1 per cent of India’s total population, but has only 2.9 per cent of its total area. Thus, the population density in Bihar, which stands at 881 persons per sq km, is one of the highest in India.

The bifurcation of erstwhile Bihar resulted in substantial mineral resources going to Jharkhand. But the state still has abundant natural resources in the form of fertile soil and plentiful wa-ter resources. Nearly 90 per cent of the total population lives in rural areas, with agriculture being the mainstay of the rural economy. Around 57 per cent of the gross cultivated area is ir-rigated.

Bihar also has a few large industries, mostly in the public sector. Major public sector units include Indian Oil Corporation (which has an oil refi nery), Hindustan Fertilizer Corporation Ltd at Barauni and Pyrites Phosphates and Chemicals Ltd at Amjhor. Other industries include cotton spinning mills at Siwan, Pandaul, Bhagalpur, Mokamah and Gaya, and sugar mills located across the state.

In addition, there are distilleries at Gopalganj, West Champaran, Bhagalpur and Riga (Sitamarhi District), leather units in West Champaran, Muzaffarpur and Barauni, jute mills at Katihar and Samastipur, a medicine manufacturing unit at Hajipur, food pro-cessing units and vanaspati manufacturing units at Aurangabad and Patna.

The investment front in the state looks promising, with total outstanding investments worth $8.6 billion envisaged in over 100 projects as of March 2007, a healthy rise of 23 per cent over the previous year’s fi gures.

Bihar’s economic performance

The GSDP of Bihar has exhibited a compound annual growth rate (CAGR) of 6.6 per cent between 1999-00 and 2005-06, increasing from $9.1 billion to $13.4 billion. This growth has been driven by two sectors – primary (compris-ing agriculture and livestock, forestry and logging, fi shing, mining and quarrying) and tertiary (comprising trade, hotels and restau-rants, transport, storage and communication, fi nancial services, real estate and related services, public administration and other

services). The secondary sector (comprising manufacturing, construction and electricity, gas and water supply) has been the weakest in Bihar; registered manufacturing, a sub sector under this category, has consistently recorded negative growth rates in recent years.

The structural composition of the state’s economy has wit-nessed an uneven transformation over the years – tertiarisation of the economy before full growth of the secondary sector. The primary sector currently accounts for 34.6 per cent of the GSDP, its share having fallen from 39.7 per cent in 2000-01. The secondary sector accounts for 11.8 per cent, having grown at a CAGR of 7.6 per cent between 2000-01 and 2005-06. The tertiary sector accounted for 53.6 per cent of GSDP in 2005-06, up from 49.8 per cent in 2000-01. This growth has been driven by increased activity in sub-sectors like communication and banking and insurance.

People - Economic prosperity

The per capita income in Bihar, which is below the national aver-age of $514.2, has grown from $65.2 in 1993-94 to $139.9 in 2004-05.

Economic Overview of the State

9.10 9.70 9.80

11.60 11.9012.60

13.40

1999 00 2000 01 2001 02 2002 03 2003 04 2004 05 2005 06

Bihar's GSDP (USD billion)

Source: Indiastat.com

CAGR 6.6%

39.7% 34.6%

10.5% 11.8%

49.8% 53.6%

2000-01 2005-06

Percentage distribution of GSDP

Source: Indiastat.com

Tertiary Sector

Secondary Sector

Primary Sector

7.60%

2.40%

CAGR

6.80%

CAGR of 7.6 per cent between 2000-01 and 2005-06.

22.7

39

26.1

12.2

15.9

28.4

23.1

32.6

> USD 6667

USD 3331-6667

USD 1668-3330

< USD 1667

Bihar

IndiaRural

4.6

16.8

32.5

46.1

6.5

10.3

25.7

57.5

Urban

Distribution of household by income(Per cent)

Source: The Market Skyline of India 2006 by Indicus Analytics

The annual income of households is also an important indicator of economic prosperity. Bihar has a lower share of households (both urban and rural) in higher income categories compared to all-India fi gures. For example, 15.9 per cent of Bihar’s urban households and 6.5 per cent of rural households fi gure in the highest income category of $6,667 and above, as compared to all-India fi gures of 22.7 per cent and 4.6 per cent, respectively.

But 32.6 per cent of Bihar’s urban households and 57.5 per cent of rural households fi gure in the lowest income category of less than $1,667, as compared to all-India fi gures of 12.2 per cent and 46.1 per cent, respectively. On the other hand, the percent-age of households in Bihar in the middle income group – $1668-$3330 and $3331-$6667 – is almost the same as in case of all-India categories, which indicates the presence of a large potential in the consuming class.

Another factor relating to the population’s prosperity is the ownership of physical assets like vehicles and consumer elec-tronics, which are indicators of consumer aspirations. A com-parison of asset ownership by households shows that consum-ers in Bihar are way behind in consumption vis-à-vis the all-India

average, as the purchasing power of people is not as high as in other developed states in the country.

Industrial performance in Bihar

Key Industries

• Food products/beverages• Tobacco products• Textiles/textile products• Leather/leather products• Wood/wood products• Paper/printing/publishing• Mines and minerals• Dairy • Tea • Sugar • Makhana (a fl owering plant with edible seeds)

Unregistered units dominate the overall industrial sector in the state, accounting for more than half of its total income. The Annual Survey of Industries (ASI) 2004-05 reveals that there are 1,675 industrial units in the state. However, in terms of net value added, food, beverages, tobacco and petroleum products account for more than 85 per cent of the total industrial income.

Though Bihar produces about 10 per cent of India’s total output of fruits and vegetables, the state’s share in processed output is only 1 per cent. This clearly shows that there is enough scope to develop this sector further.

Tea and dairy are two major industrial sectors in the state. Other potential industries are sugar, makhana, leather, textile and handloom. Mineral production in Bihar includes pyrites, quartz-ite, mica and limestone.

Industrial centres

The main industrial centres are Patna, Magadh, Muzaffarpur, Barauni, Bhagalpur, Munger, Darbhanga and Tirhut.

According to the Department of Industries, the number of large and medium industries in the state is only 259, of which the highest concentration (38.2 per cent) is in Patna division, followed by Tirhut (21.6 per cent) and Magadh (9.7 per cent). Out of 38 districts spread over in 9 divisions, 10 do not have any large/medium industrial unit.

Patna is an important business and agricultural centre of eastern

4%

1%

All-India

Bihar

Four-wheelers

Source: The Market Skyline of India 2006 by Indicus Analytics

18%

5%

All-India

Bihar

Two-wheelers

41%

15%

All-India

Bihar

Television

64%

14%

All-India

Bihar

Electricity

BIHAR PAGE 9

India, exporting grain, sugarcane, sesame and medium-grained rice. It has also emerged as a big and rapidly expanding con-sumer market, both for fast moving consumer goods (FMCG) and consumer durable items. The government plans to develop Patna as the second international gateway in eastern India (after Kolkata) to exploit its tourism potential and for promotion of trade and commerce with neighbouring countries in the east.

Muzaffarpur district is home to several industrial units, the major ones being Prabhat Zarda, Indian Drugs & Pharmaceuticals Ltd (IDPL), Bharat Wagon and Engineering Ltd., Leather Develop-ment Corporation and Muzaffarpur Dairy (a unit of the Bihar State Dairy Corporation). It is an also important trade centre for textiles, mango and litchi.

The Barauni refi nery of Indian Oil Corporation Ltd (IOC) is one of the country's biggest oil refi neries. It has a capacity of 6 million metric tonnes per annum (MMTPA). State-owned Bihar State Electricity Board (BSEB) signed a memorandum of un-derstanding (MoU) with Vikash Metal and Power Ltd (VMPL), a Kolkata-based company, for setting up a power plant at Barauni at a cost of $500 million.

Bhagalpur is famous worldwide for its silk production. A silk culture institute and an agricultural research station are also located in the city, which has major road and rail connections. Other industries include rice and sugar milling and wool weaving. Gaya is another major weaving centre with around 8,000 power looms.

Investments in Bihar

Outstanding investments in Bihar stood at $8.6 billion as of March 2007, lower by 2.73 per cent as compared to the pre-vious year. This fall was induced by an 11.8 per cent drop in investment in the power sector, which accounted for a dominant share of almost 67 per cent in total investment.

However, outstanding investment in the manufacturing as well as mining sectors surged by an impressive 300 per cent and 263 per cent, respectively. This robust increase in the manufacturing sector can be attributed to the growth in investment in food and beverages (265 per cent).

As on March 2007, 82 projects worth $2.6 billion were in the announcement stage, 23 projects worth $3.6 billion were proposed and 86 projects amounting to $2.7 billion were under

Table 1: Distribution of Large and Medium Units in Bihar by Industrial Groups and Division

Divisions Food, Tobacco,

Beverages

Cotton, Wool,

Jute, Paper

Material, Metal,

Machine

Rubber, Plastic,

Chemicals

Total

(Share in

per cent)

Patna 22 18 52 7 99(38.2)

Magadh 6 1 9 9 23(9.7)

Bhagalpur 2 3 3 2 10(3.9)

Munger 2 3 1 12 18(6.9)

Saran 12 1 1 0 14(5.4)

Tirhut 21 6 16 13 56(21.6)

Darbhanga 9 9 - 1 19(7.3)

Koshi - - - - -

Purnia 8 6 3 1 18(6.9)

82(31.7) 47(18.1) 85(32.8) 45(17.4) 259(100)

Source: Economic Survey of Bihar 2006-07

Mining1.4%

Electricity67.0%

Manufacturing11.3%

Services17.6%

Irrigation9.4%

Source: Monthly Review of states of India, CMIE March Report 2007

Breakup of Investments by sector

implementation. Among the new projects announced, Dhauad-har Industries’ Kumarbagh sugar project worth $44.4 million, was the largest; next came the $33.3 million Kahalgaon cement project.

The state government plans to invest $46 million for developing infrastructure in various tourist spots to promote the tourism sector.

Labour force in Bihar

Bihar accounts for only about 7 per cent of the total organised sector employment in India’s public sector and a mere 3 per cent in the private sector.

Of the total population of 82.88 million, the workforce adds up to 28.1 million (34 per cent). After the division of Bihar in 2000, there has been a change in the percentage distribution of work-ers – the maximum number of the workers is engaged in the agriculture sector as cultivators or labourers.

Infrastructure in Bihar

Land

Land acquisition in Bihar is under the purview of the Land Ac-quisition Act 1894. Based on this Act, the state government came out with the Bihar Land Acquisition Rules, 2007. Investors can acquire land from the following sources:

• Bihar Industrial Area Development Authority (BIADA) – land that is classifi ed/earmarked for industrial purposes, provided the investor is keen on investing within the premises of the park

• Private transaction – Purchasing land outside the industrial area from a private party;

• Government can acquire agricultural land, convert its classi-fi cation for industrial purpose and provide it to BIADA, thus making it available to investors

Land/shed in Growth Centres or Industrial Areas is allotted by BIADA to entrepreneurs for setting industrial units on lease of 90 years with option for renewal. The rent is subject to revision after every 20 years. The predetermined cost of developed land/shed is realised in easy installments. The entrepreneur has the right to mortgage the land/shed with fi nancial institutions/banks – for getting term/working loans – without requiring separate permission either of

Table 2: Employment in organised sector (lakhs) Public Sector Private Sector

2000 2001 2002 2000 2001 2002

Bihar (share in all-India) 13.6(7.1) 13.6(7.1) 13.6(7.2) 2.5(2.9) 2.5(2.9) 2.5(3.0)

All India 193.1 191.3 187.7 86.4 86.5 84.3

Table 3: Percentage Distribution of Workers in Re-organized Bihar Economic Classification Number in thousands Share in total

Per cent

Cultivators 8,192 29.2

Agricultural labourers 13,527 48.2

Household industries 1,086 3.9

Other workers 5,273 18.8

Total workers 28,080 100

(Source: - Census of India, 1991)

Note: - Total may not tally due to rounding off the figure.

Source: Manpower Profi le, Institute of Applied Manpower Research, 2004, New Delhi; fi gures in parentheses are the percentage share of Bihar employment vis a vis all-India fi gures

BIHAR PAGE 11

the Government or the Industrial Area Development Authority. The Industry Department would determine the period of con-struction for large, medium and small scale units. The lease deed would carry the condition that if the unit is not constructed within the prescribed period, the land could be taken back. Au-thorities managing Industrial Areas and Growth Centres would be the single contact point for clearances regarding allotment of land.

In order to expedite the process of land allotment, a number of inter-departmental references have been minimised along with decentralisation of powers to the level of collectors. Collectors maintain detailed information on all available Government land in the district. While the collectors are authorised to allot up to 5 acres of Government land for industrial purpose, govern-ment land in excess of this is leased to entrepreneurs with the approval of the Empowered Committee.

Educational infrastructure

Status of educational Institutes• 12 universities/deemed universities• 11 research institutions• 743 arts, science and commerce colleges• 7 engineering degree colleges• 23 medical colleges• 15 teacher-training colleges• 63 other educational institutionsSource: RHS Bulletin, March 2006, M/O Health & F.W., GOI and India stat.com

There are 36,798 primary, 15,314 middle, 62 Government Sec-ondary Schools and 2,534 Rajkiyakrit Secondary schools besides other minority and informal educational institutions. Bihar’s educational network includes the universities of Nalanda (one of the earliest universities of India), Vikramshila and the University of Patna, which has 11 colleges. The literacy rate of the state is low at 47 per cent, as compared to the national average of 64.8 per cent.

An international university as a centre of excellence has been planned as a regional initiative with the help of major Buddhist countries of the Far East and South East Asia.

Medical and Healthcare Facilities

Health Indicators

Bihar All-IndiaPopulation served per Doctor 2,363.9 1,607Birth rate* 31 24.8 Death rate* 10.5 8.1 Infant mortality rate** 61 63

*per thousand persons **per thousand live births Life expectancy at birth(Years)Male 61.6 64.1Female 59.7 65.4

Source: Statistical Abstract of India, Economic Survey of Bihar

There are 121 hospitals, 1,641 primary health centres, 70 com-munity centres and 1,000 dispensaries/clinics in Bihar. Some policy decisions in the area of health have been the establish-ment of the ‘Mukhya Mantri Sahayata Kosh,’ to provide medical facilities to families with annual income upto $2,000.

Infrastructure for savings & borrowing

There are three kinds of institutions functioning in the state – banks (including commercial banks, regional rural banks, co-operative banks as well as other co-operative institutions), state fi nancial institutions and national fi nancial institutions. Co-operatives largely look after the requirements of the agricultural sector, commercial banks provide fi nance for industry as well as agriculture, state fi nancial institutions help to promote industrial development and national level institutions cater to the require-ments of large-scale fi nance.

The state has a large number of commercial bank branches (2,061) compared to regional rural banks (1,482) and co-opera-tive banks (152). The Bihar State Finance Corporation, which had stopped lending due to huge outstanding loans, has been revived. The National Bank for Agriculture and Rural Development (NA-BARD) is helping support rural projects.

Transport Infrastructure

Roads

Bihar has a total road length of 81,655 km, of which 77.5 per cent are village roads. The length of National Highways and State Highways in the state stands at 3,629 km and 3,232 km, respec-tively. The state has 77 km of road length per 100 sq km and only 50 per cent of roads are surfaced as against the national average of 60 per cent.

The old Grand Trunk Road is being upgraded to 4/6-lane super-highway under the Golden Quadrilateral Project. An east-west 4-lane high-speed corridor is under construction by the Na-tional Highways Authority of India. Under the National Highway Development Project, 3,890 km of national highways have been identifi ed for upgradation to 4-lane under the build-operate-transfer (BOT) scheme, providing additional corridors to Nepal and Assam. District roads are to be converted into state highways under the state highway development programme to further improve connectivity within the state. Civil Aviation

Major airports in Bihar include Patna International Airport and an international airport at Gaya. Muzaffarpur, Raxoul and Jogbani are the other domestic airports in Bihar. Thirty-nine district headquarters have air strips/aerodromes. Small air taxi/charter services are available at Patna. The state government plans to set up an air cargo complex in Patna that will be promoted by the Bihar Industrial Area Development Authority (BIADA) and the Airport Authority of India at a cost of around $1.6 million.

Railways

The state has an extensive and well-developed railway network providing vital links between the mining and tourism centres and important cities and ports in the country. The total rail length in the state exceeds 5,400 km. 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. Over $1.4 billion worth of investment has been planned by the Central Government for the moderni-sation of railways in Bihar, including gauge conversion, doubling of lines and electrifi cation.

Inland Waterways

The stretch of Ganga between Allahabad and Haldia has been declared National Waterway 1 and is being developed for naviga-tion by the Inland Waterways Authority of India. A permanent terminal is being planned at Patna, and cargo handling facilities are being developed accordingly. The National Inland Navigation Institute has been set up in Patna to train crew.

Power

After bifurcation of the state, 70 per cent of the generation capacity of erstwhile Bihar has fallen within the jurisdiction of Jharkhand, but 70 per cent of the load is left with present-day Bihar. Its power generating capacities were considerably dimin-ished to just 565 MW in thermal plants in Barauni (320 MW) and Muzaffarpur (220 MW) with a limited 25 MW generated from hydel power sources.

Table 4: Upcoming Aviation Projects

Cost (USD million)

Status Location

Gaya Airport New Terminal Building

Project

9.7 Under

Implementation

Gaya

Kishanganj Airport Project 0.8 Proposed Kishanganj

Total Investment 10.5

Table 5: Present power scenario in Bihar

Average

National Bihar

Percentage of villages electrified 84 per cent 41 per cent

Household electrification 55.8 per cent 10.3 per cent

Per capita consumption 612 units 76 units

Source: Indian business website

BIHAR PAGE 13

New projects in the pipeline involve a total estimated cost of $4.4 billion in the ongoing 11th Five Year Plan (2007-2012) with a total capacity of 4,820 MW. These include Barauni T.P.S exten-sion project, Pirpainti T.P.S, Nabinagar and Katihar projects, all planned for completion in four-and-a-half years. The Bihar State Hydroelectric Power Corporation (BSHPC) has hydel power projects in fi ve districts with a capacity of 44 MW, and is target-ing a higher utilisation rate.

Abhijeet Group, a diversifi ed business group with interests in steel, power and construction is investing over $1.4 billion to set up nine, coal-based thermal plants (each with 135 MW capacity) at Navinagar, Lakhisarai, Pirpainti and Banka in Bihar.

Telecommunications

Bihar fi gures among the fi rst fi ve states in the country in terms of revenue per Direct Exchange Line (DEL). Calculations show a tele-density of 70 telephones per thousand population, compris-ing fi xed lines, global system for mobile communications (GSM) and code division multiple access (CDMA) connections. There were 1,163 exchanges in the state as on April 1, 2006. At pres-ent, there are 6.8 million telephone connections in Bihar. Of the four operators, BSNL commands the largest share of 41 per cent, followed by Reliance, Bharti and Tata Telecom. Industrial infrastructure

Bihar is aggressively working on building industrial infrastructure including an Export Promotion industrial park, Food Parks, an Air Cargo Complex, a Software Technology Park, an Inland Con-tainer Depot and Agri-Export Zones.

Export Promotion Industrial Park

Export Promotion Industrial Park (EPIP), Hajipur, is being devel-oped as a multi-product export-processing zone for north Bihar under the umbrella of the Union Ministry of Commerce and Industry and the Government of Bihar. It would be spread over 94 acres and cost about $2.6 million with requisite infrastruc-ture facilities for setting up export units.

Food Park

The Union Ministry of Food Processing Industry has sanctioned the establishment of Food Parks at Hazipur and Begusarai to promote agro-based and food processing units. The infrastruc-ture will include cold storage units, refrigerated vehicles and effl uent treatment plants.

Air Cargo Complex

Though Bihar has considerable potential for export of agricul-ture/horticulture products, it has under-performed in terms of exports, partly due to the absence of air cargo infrastructure. An Air Cargo Complex is proposed to be built adjacent to the Jai Prakash Narayan Airport, Patna, to be promoted by the BIADA and Airport Authority of India. The complex will facilitate exports of fruits, vegetables and horticulture products, silk and other exportable items. The complex will feature:• Pre-cooling facilities as well as cold storage for highly perish-

able commodities such as fl owers, fruits and vegetables;• Elevating Transfer Vehicle (ETV) for storage and retrieval of

ready-built unit load devices;• Modern cargo equipment like cranes, forklifts, high-reach

stackers, power pallet trucks CCTV monitor and control.

Software Technology Park

The 45th Software Technology Park (STP) in India is coming up on the campus of the New Government Polytechnic Complex in Pataliputra Colony in Patna. The project involves grants-in-aid of $200,000 and provision of three acres of land. The STP would have 5,000 sq ft of built-up space. The Biscoman Tower, where the STP is located, is a city landmark with excellent IT and social infrastructure.

Inland Container Depot

Inland Container Depot, Sitalpur, is one of the mega infrastruc-ture projects sanctioned and fi nanced by the Union Ministry of Commerce and Industry, at a projected cost of $5.1 million. It is being set up to facilitate export of fruits, vegetables, horticulture products and other exportable items produced in the state. Land acquisition is in process. Its salient features are:• Two full train length rail lines• 500 sq m covered warehouse space for import cargo• 5,000 sq m covered warehouse space for export cargo • Open space for stacking 3,000 loaded containers• Open space for stacking 4,000 empty containers• Eight hectares parking area to accommodate 4,000 trailers• Administrative building with 4,000 sq m of built-up area • Computerised weigh bridge facility• Container repair facility

Agri-Export Zone

Bihar is the largest producer of litchi in India. An Agri-Export Zone (AEZ) is being developed for promoting litchi exports from the districts of Muzzafarpur, Samstipur, Hajipur, Vaishali, East and West Champaran, Bhagalpur, Begusarai, Khagaria, Sitamarhi, Saran and Gopalganj. Various central government agencies will contribute $900,000 for the $2.6 million AEZ, while the state government and private agencies will contribute the rest. The projected incremental exports of litchi from this zone is $34.1 million over the next fi ve years and around 10,000 farm-ers are likely to benefi t. Policy Framework

The post-liberalisation era has ushered in new investment chal-lenges and opportunities for various Indian states. The Bihar gov-ernment has announced various investment-friendly policies and initiatives to create an attractive investment climate in the state.

Industrial Incentive Policy 2006

Key initiatives under this policy include: • Bihar Single Window Clearance Act – 2006, for rapid clear-

ance procedures for new industries • Bihar Infrastructure Development Enabling Act – 2006, to

provide for development of physical and social infrastructure in the state and to attract private sector participation

• Provision of self-certifi cation to simplify the inspection of factories

• Establishment of Land Banks to meet the requirements of industries and development schemes

• To develop handicraft, handloom, khadi, silk and village indus-tries

• Granting of incentives (pre-production incentives 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 certifi -cate, VAT, luxury tax, electricity duty, conversion fee, market fee etc)

• Special incentives announced for investment in education include subsidy on land and its registration, subsidised infra-structure support (water, power, approach roads) along with assistance in seeking approvals from the All India Council of Technical Education (AICTE)

Signifi cant measures include waiving of the minimum monthly guarantee electricity bill, discontinuation of land registration

charges and reimbursement of Value Added Tax (80 per cent in the case of new units and 25 per cent for old units).

Policy for Sugar Industry

Key initiatives under this policy include:• Incentive package including reimbursement of Central Excise

Duty on sugar for a period of fi ve years• Exemption of purchase tax on sugarcane for fi ve crushing

years• Exemption of stamp duty and registration fees for land trans-

fer• 10 per cent subsidy on capital investment or a maximum

$2.2 million, whichever is less, on machinery, after comple-tion of fi rst year of commercial production

• Incentive package for distillery and ethanol as well co-gener-ation of power

Single Window Policy

Following introduction of the policy relating to single-window clearance for private investments in August 2006, the state saw investments of $132.7 million and has received 205 investment proposals.

Agriculture Policy

An Agriculture Policy was drafted by the state government in 2006 to build upon the natural advantages that the state has in agriculture. Food security, increase in crop productivity, increase in farmers’ income and environmental conservation are the four targets of the new agricultural policy regime. A mega project for establishment of soil testing laboratories in all 534 blocks has been sanctioned, to make soil-testing facilities more accessible for farmers.

Further, 31 new seed-testing laboratories are to be established to provide every district with its own laboratory. Micro-nutrient testing laboratories have been established in three districts. Research and educational infrastructure of the Rajendra Agricul-tural University, the only agricultural university in the state, has been strengthened.

The Bihar State Seed Corporation has been revived, and seed production has been started on 45 state agricultural farms. A Farmers’ Commission and a Land Reforms Commission have been established.

BIHAR PAGE 15

Key Nodal Agencies

The state legislature enacted the Bihar Single Window Clear-ance Act, 2006, to provide for speedy processing of clearances for implementation of industrial and other projects and ensure single point clearances to promoters for early commercial pro-duction of such projects.

The nodal agencies are the Industries Department at the state level and the District Industry Centre at the district level; the supervisory bodies are the State Investment Promotion Board (SIPB) and district level empowered committees.

Projects with investment above $23.8 million are routed through the Chief Minister and the Cabinet for approval.

Industries Department

The Industries Department acts as a state level nodal agency and plays the role of a facilitator and enabler for all investments between $2.38 million and $23.8 million. It is headed by the director, technical development. Its primary functions involve providing a common application form, assisting the investor in fi lling up the form, helping in convening the SIPB meeting and facilitating the process of getting fi nal clearances with various departments.

Udyog Mitra

Udyog Mitra, part of Industries Department, disseminates rel-evant information to the investor pertaining to investment pro-fi les for different industries and the various clearances required at the business entry stage.

District Industry Centre

The District Industry Centre acts as nodal agency to handle

investment proposals and is headed by a general manager. Since this system is still at the nascent stage, implementation at the district level has not yet gained in momentum.

State Investment Promotion Board

The act states that the state government notifi es the SIPB as the state level empowered committee, which will review investment proposals worth between $2.38 million and $23.8 million, and is-sue ‘in-principle’ approvals that will be binding on the concerned authorities. Subsequently, investors need to approach individual departments directly to get fi nal clearances.

District Level Empowered Committee

A District Single Window Clearance Committee has been set up by the government for each district to act as the approving authority. Investment proposals that are less than $2.38 million are under the purview of this committee.

Bihar State Financial Corporation (BSFC)

BSFC is the main state level institution providing term lending facilities to entrepreneurs. Banks have also shown increasing interest in term lending to industrial units. BSFC will be restruc-tured and strengthened to meet the growing needs of entrepre-neurs. The corporation also undertakes the appraisal of projects coming up in the state with a view to raising money from the capital market.

Bihar State Hydroelectric Power Corporation (BHPC)

BHPC has been the nodal agency for development of hydel potential in Bihar. The company is moving ahead to achieve its

STATE LEVELINVESTMENT

PROMOTION BOARD

UNDER THE CHAIRMANSHIP OF:

Industries Development Commissioner

District Collector,

Industries Department (Udyog Mitra)- State level

District Industries Centre - district level

NODAL AGENCY:

DISTRICT LEVEL

COMMITTEE

INVESTMENTS HANDLED:

Lower than USD 2.38 million

Between USD 2.38 & 23.8 million

Single window clearance mechanism in Bihar

objectives of identifying potential for hydro projects, planning and executing them. It is involved in the business of purchasing, selling, manufacturing, trading, and maintenance of hydroelectric and other projects.

Bihar Industrial Area Development Authority (BIADA)

BIADA was constituted under the statutory provision of the Bihar Industrial Area Development Act 1974, to promote and assist industrialisation and create awareness about the industrial policy of the state. BIADA is the nodal agency nominated by the state government to co-ordinate and implement activities of the Agri-Export Zone and schemes under the guidelines of APEDA to promote the export of fruits and other agro products grown in Bihar.

Key industries and players in Bihar

Bihar has a mix of industries – agro-based, food processing, silk/textiles, leather and mineral-based as well as miscellaneous engineering-based industries.

Agro–based

Bihar produces several types of agriculture products such as rice, wheat, maize, gram, oilseeds, sugarcane and jute.

Sugar Industry

Sugar industry is the largest agro-based industry in Bihar. The current production in the state is 13 million MT and the tar-geted production by 2015 is 46.7 million MT. It is estimated that about half a million farmers and their dependents are engaged in the cultivation of sugarcane and another 50,000 unskilled and skilled personnel, including trained technologists, are engaged in the sugar industry in the state. Sugarcane is grown on 230,000 hectares (around 4.5 per cent) of the total 5.4 million hectares of cultivable land in the state.

The sugar industry attracted private investments to the tune of $1.1 billion in 2006. Closed sugar units are being revived, consid-ering the expanding market for ethanol blended fuel. The state has received over 19 proposals for establishment of greenfi eld projects with a cumulative crushing capacity of over 100,000 tonnes/day and distillery capacity of 235 kilolitres/day. These will create direct and indirect job opportunities for 210,000 people.

K.K. Birla Group

The K.K. Birla Group’s sugar company Upper Ganges Sugar (UGSIL) has two units in Bihar – Bharat Sugar Mills, Sidhwalia, District Gopalganj, with a crushing capacity of 2,500 tonnes per day, and Hasanpur Sugar Mills, Hasanpur, District Samastipur, with a crushing capacity of 1,750 tonnes per day. UGSIL is investing $88.4 million for expansion of both units to crush 5,000 tonnes per day each, apart from setting up a sugar refi nery and co-gen-eration unit at Bharat Sugar.

Indian Gasohol Ltd

Indian Gasohol Ltd (IGL), a company started by a group of NRIs, plans to produce fuel alcohol for blending with petrol and diesel. It pans to invest $299.4 million for setting up four maize-based industrial units in Bhagalpur, Muzaffarpur, Begusarai, and Vaishali.

It has proposed a further investment of $3.4 billion to set up 10 mega distilleries for producing ethanol from sugarcane with a combined capacity of 5.4 million tonnes annually. Each unit would have a crushing capacity of 25,000 tonnes crushed daily (TCD). Apart from ethanol, the mills would also generate 2,000 MW of energy out of bagasse, of which 70 per cent will be surplus and will be utilised by the state government for rural electrifi cation.

Tobacco

The availability of Kendu leaves and cheap labour has helped make Bihar the country's sixth largest tobacco producing state. Bidi manufacturing industries are located at Bihar Sarif (Nalanda district) and Janjha in Munger district.

ITC Ltd

The fi rst cigarette factory of ITC Ltd was established in Munger. ITC has decided to invest $6.6 million in various schemes, in-cluding primary education and health care in Munger district.

Status of Sugar Industry

No. of sugar mills 29

Total Cultivable land 5.5 million hectares

Land under Sugarcane 0.23 million hectares

Total Sugarcane production 129.9 million MT

Sugar produced 0.4 million MT

Crushing duration 122 days

BIHAR PAGE 17

Food Processing

Bihar is the eighth largest producer of food grains in the country, the third largest producer of vegetables (6.72 million MT per annum) and the sixth largest producer of fruits (3.03 million MT per annum). Pineapple and makhana are also produced in large quantities in the state.

The major food processing activities in the state are milling and milk processing. Currently, there are 58 roller fl ourmills, 4,872 rice mills (3.5 per cent of total rice mills in India) and 45 licensed fruit and vegetable processing units.

The food processing industry in Bihar, which has grown at an av-erage of 3.5 per cent over the last three years (compared to an all-India average of seven per cent) is mainly in the unorganised sector. The government is laying emphasis on setting up of cold storages. Private sector participation is encouraged for packag-ing and food processing to ensure better quality and production through modern technology.

Usher Agro

Usher Agro commenced operations in 1996 and is engaged in the milling of paddy. It has set up a fully automatic rice mill plant at Buxar. The Buxar plant, which started commercial production in November 2003, is fully automated with an installed capacity of 46,800 tonnes per annum (TPA). The company produces raw white rice, par-boiled rice and steam rice of different grades of both the basmati and non-basmati varieties.

Dairy

A number of milk cooperative societies have been established in the state, and the targeted milk production by 2015 is 8.4 million MT.

COMPFED

The Bihar State Cooperative Milk Producers’ Federation (COMFED) is one of the few success stories of organised milk processing in India. COMFED’s success is based on integrated vertical and horizontal linkages across the supply chain of milk. It provides all the elements of supply chain intervention to its members – upgradation of milk production technology (includ-ing milch animals varietals and productivity enhancements), animal health, effi cient procurement, storage and processing (using appropriate and latest technology), and market linkage. COMFED procures 600,000 litres of milk per day through milk unions. Procurement has increased by about eight times from

1991–92 to 2005–06. It contributes 9 per cent of the total milk processed in the state and sells milk and milk-based products under the popular brand ‘Sudha’.

Other sectors with potential include processing of litchi, honey, makhana, mango and tea.

Litchi

Bihar is known for its premium litchi. The area under litchi is concentrated in the districts of Muzaffarpur, Vaishali, Madhubani, Samastipur and other adjoining districts of north Bihar. The area covered is around 28,870 hectares and current production is 336,852 MT. This accounts for 80 per cent of national produc-tion. Its targeted production by 2015 is 500,000 MT. Litchi's wholesale price in Bihar is less than that of competing states, giv-ing it a comparative advantage in the domestic as well as export market.

Realising the potential of this fruit, an Agri-Export Zone for litchi has already been sanctioned. The Planning Commission has identifi ed Muzaffarpur district for fund infusion for systematic development. A National Centre for Litchi has been established at Muzaffarpur.

Honey

Bihar is one of the leading honey-producing states in India. The main beekeeping regions are the districts of Muzaffarpur, Vaishali, Sitamarhi, Champaran, Madhepura, Katihar and Begusarai. The present production capacity of honey is 1,300 MT (13 per cent of the total production capacity in India) and the target for 2015 has been fi xed at 3,900 MT. Bihar is the only state producing honey on a commercial scale. It has the potential to produce about 40,000 MT of honey with an estimated value of $44.2 mil-lion annually, employing over 600,000 people.

Makhana (Gorgon nut)

Bihar is the only state producing makhana (gorgon nut) com-mercially. Makhana is an aquatic organic crop rich in protein and low in fat content. Bihar accounts for over 80 per cent of the makhana production in the country. Madhubani, Darbhanga, Si-tamarhi, Saharsha, Katihar, Purnia, Samastipur, Supaul, Kishanganj and Araria districts are major producers of makhana. Investment

Table 6: Exports of litchis (fresh & processed) from BiharYear 2002-03 2003-04 2004-05 2005-06Quantity in MT 152 388 624 900

Source: Economic Survey of Bihar

opportunities exist in contract farming as well as processing and exports (pure organic-based cultivation gives an added advan-tage to the crop, particularly in the export market).

Mango

Mango is the leading fruit crop of Bihar with an approximate share of 50 per cent of the total area under fruit crops. It is grown in over 100,000 hectares of land; the state has an annual production of 1.5 million MT. Bihar is the fourth largest produc-er of mangoes in the country, accounting for nearly 11 per cent of the total production.

The state is known for a large variety of mangoes grown in its plains, the most popular being Maldah, Bombay, Jardalu, Jrada, Safeda, Sepia, Sukul and Gulabkhas. The leading mango-producing districts include Darbhanga, Muzaffarpur, Samastipur, East and West Champaran and Bhagalpur. The Planning Commission has identifi ed the district of Darbhanga for systematic development of the fruit crop for its total commercial exploitation.

Tea

Around 20,000 acres of land are covered under tea plantation in Kishanganj district, providing employment to about 15,000 workers. The district has been declared as a non-traditional area under a Tea Board scheme, and enjoys subsidies/incentives. There are two processing units in the district, which produces green leaf tea that is ultimately converted to around 2,300 tonnes of processed tea.

Lochan Tea Ltd

Lochan Tea Ltd began operations at its Doke plantation in Kis-hanganj in 1997. The plantation is a testing ground for planting and raising organic tulsi leaves and tea. Situated on the banks of the Doke, the organic farm is located between Pothia and Thakurgunj towns in the district.

Textiles (handloom and silk)

There are 10,817 handlooms under the co-operative sector and

11,361 powerlooms in Bihar. The handloom sector is concen-trated in the districts of Patna, Gaya, Bhagalpur, Biharsharif, Madhubani and Siwan. There are 1,089 Primary Weavers Coop-eration societies in the state. The government has introduced various welfare schemes for the handloom and powerloom sec-tors relating to marketing assistance, modernisation of weavers training centre and shed-cum-housing facilities for rural weavers.

The Tasar Silkworm rearing areas in Bihar are Bhabhua, Rohtas, Nawada, Jamui, Banka and Munger, while the reeling and weaving areas are Bhagalpur, Banka, Gaya, Raxaul and Nawada.

The leading spinning mills in Bihar include:Bhagalpur Co-Operative Spinning Mill, BhagalpurSiwan Co-Operative Spinning Mill, SiwanPandaul Co-Operative Spinning Mill, Pandaul (Madhubani)Bihar Spun Silk Mill, Bhagalpur

Leather Industry

Leather-based industries have vast potential in the state owing to Bihar’s rich cattle population and the high quality of their hides. There are around 50,000 footwear artisans in the state with tanneries in the private sector. There are 85 leather units, of which 20 manufacturing units each are located in Patna, Muzaffarpur and Bettiah, and the remaining 25 units take up only job work.

The leather tanning industry consists of units established under the Bihar Leather Development Corporation (BLDC) and its sister concern, the Bihar Finished Leather Ltd; private tanneries operate at Muzaffarpur (six tanneries in the industrial area at Muzaffarpur) and Mokhamehghat.

Bata India Ltd Incorporated in 1931, Bata India Ltd was promoted by the Toronto-based Bata Shoe Organization. Bata is India`s largest manufacturer and marketer of footwear products. It manufac-tures different types of footwear. Bata has a tannery at Mokame-hghat and a leather footwear factory at Bataganj in Patna.

Engineering industry

Some key players include:Bharat Wagon and Engineering Co LtdBharat Wagon and Engineering Co Ltd, part of Bharat Bhari Udyog Nigam, a Government of India undertaking, has manu-facturing units in Mokama and Muzaffarpur. Both the units have

Table 7: Makhana production in Bihar and India Area Production Farm gate value (In Ha) (In Tonnes) (In million USD)India 18500 54550 97.4Bihar 16850 50550 97.4

Source: Economic Survey of Bihar

BIHAR PAGE 19

been accredited with ISO 9001-2000 certifi cation for manu-facturing of wagons. Its third unit is at Bela in Muzaffarpur for manufacturing LPG cylinders.

IDL Industries Ltd

IDL Industries Limited, a Hinduja group company, is the second largest detonator manufacturer in the world. The company manufactures detonators and slurry explosives for commercial use. It has a production facility at Rajarappa and a support bulk unit at Rajmahal.

Sonalika Tractors

International Tractors Ltd (ITL), part of the Sonalika group (with a turnover of $220 million), is a leading manufacturer of tractors and other agricultural equipment and components. Its prod-uct line includes multi-utility vehicles, three-wheelers, engines, hydraulic systems, castings, forgings, brake systems automotive components, farm equipment and implements. It has acquired land for setting up a plant at Fatuha Industrial area in Patna. With an investment of $28.7 million, the plant will have an annual capacity of 40,000 units.

Mines and Minerals

Though undivided Bihar possessed nearly 25 per cent of the to-tal mineral deposits in the country, post-bifurcation, the state is left with only one per cent of the total deposits. Two minerals – limestone and pyrite – are found in suffi cient quantities in Bihar.

Eight districts – Rohtas, Kaimur, Bhagalpur, Banka, Munger, Jamui, Gaya and Nawada – are important in terms of mineral wealth. Further, 30 known decorative stone deposits are present in Banka, Jamui, Nawada, Jehanabad and Gaya. Bihar also has 68 mil-lion cubic meters of granite deposits; 32.04 cubic metres are of the best quality.

Ambuja Cement

One of India’s leading cement manufacturers, Ambuja Cement received approval for a $35 million, four million MT capacity ce-ment plant at Barh.

Birla Corporation

Birla Corporation, a fl agship of the MP Birla group, has proposed setting up a $30 million, million-tonne grinding unit in Barh. The proposal is currently being processed.

Century Plywood

Century Plywood, a Kolkata-based fi rm, is setting up a million-tonne cement grinding unit in Kahalgaon at a cost of $30 million.

IT and Communications

Bihar has initiated several measures for computerisation of operations in areas like treasury, fi nance, collection of taxes, payment of electricity bills and governance within the judiciary. Video-conferencing has been initiated in all the 38 districts, with State Wide Area Network (SWAN) being established along with Vasudha Kendras (e-service centres) in all the panchayats.

Tata Consultancy Services

The state government has signed a memorandum of understand-ing (MOU) with Tata Consultancy Services, a leading IT fi rm, for software applications for integrated workfl ow and data manage-ment system, monitoring of rural management, revenue adminis-tration including administration of value-added tax scheme.

Petroleum Products

Indian Oil Corporation’s refi nery at Barauni was built at a cost of $10.9 million; it has a capacity of six MMTPA. A catalytic reformer unit (CRU) was added to the refi nery in 1997 for pro-duction of unleaded motor spirit. A 943-km-long Haldia-Barauni pipeline receives crude oil at Haldia oil jetty and transports it to Indian Oil’s Barauni refi nery. The crude oil requirement of Indian Oil’s subsidiary refi nery at Bongaigaon is also partly transported through the pipeline up to Barauni.

The Industries Department acts as the single point contact for all investment proposal applications. Within the Industries Department, Udyog Mitra is the main information dissemination division. As a part of its facilitation process, Udyog Mitra provides a ‘Step by Step’ approach to open a business, and provides guidance and assistance to the investor. There is a process of ‘deemed approval’ and the time limits that have been stipulated as per the Single Window Act for every department are provided below.

DOING BUSINESS IN BIHAR

Table 8: Time taken for various licenses as envisaged

Items List of approvals & clearances Departments to be consulted Days

Incorporation Incorporation of the company Registrar of Companies NAApplication for Director Identity Number, Permanent Account Number

Ministry of Corporate Affairs/ Income Tax department 1 day

Registration, Industrial Entrepreneur's Memorandum, Industrial Licenses

District Industry Centre/ Bihar Industries Department/ Secretariat of Industrial Assistance NA

Land Allotment of land Bihar Industrial Area Development Authority (BIADA)

7-21 days (90 for non-industrial land)

Permission for land use Revenue and Land Reforms Department

30 days (45 days for conversion of non-Industrial land)

Factories and Boilers

Registration with Inspector of Factories under Factories Act, Registration with Inspector of Boilers under Boilers Act

Office of the Chief Inspectorate of Factories, Office of Chief Inspector of Boilers 30 days

Environment Site environmental approval State pollution control board and Ministry of environment and forests 60 days

No Objection Certificate and consent to establish under Water Act 1974, Air Act 1981 and Environment Protection Act 1986

State pollution control board and Ministry of environment and forests 30 days

Construction Approval of construction activity and building plan Town and country planning authority 7 days

Health & Safety

Health clearance, Safety Certificate from Chief Electrical Inspector

State Health Society, Electrical Inspectorate department

Power Sanction of power State electricity board 30 days

Water Sanction of water State water board 30 days

Fire Fire service clearance State Fire Service Headquarters 15 days

Taxes

Registration under states sales tax act, Value added tax and central and state excise act

Sales tax department, Central and State excise departments 7 days

Source: Industries Department, Government of Bihar

BIHAR PAGE 21

Cost Estimates

This gives an insight into various cost estimates for doing business in Bihar.

Table 9: Cost of doing business in Bihar

Cost of land per acre* Government Land: USD 72,000 in Hazipur (leading industrial area of the state); USD 20,300 (Upcoming industrial area like Muzzafarpur)

Hotel costs** USD 86 to USD 95 per room night

Cost of office space*** 20-35 cents per square foot per month

Cost of residential space***

USD 143 to USD 281 per month for a 2,000 square feet house

(Rates depend on the type of structure and location)

Power cost**** Industrial use: 1) LT Ind.- (a) Up to 25 HP 9.2 cents per kWh

(b) 26 to 99 HP 9.5 cents per kWh

2) HT Ind.- (a) Up to 33KVA 9.2 cents per kWh

(b) 34 to 132 KVA 9.3 cents per kWh

(c) 75 to 1500 KVA 9.4 cents per kWh.

Commercial use: (a) 1 to 100 KW 9.3 cents per kWh

(b) 101 to 200 KW 10 cents per kWh

(c) More than 200 KW 10.67 cents per kWh

Cost of water***** Commercial & Industrial: Not Regulated. Industries are allowed to set up their own water pump to draw ground water.

*Source: Bihar Industrial Area Development Authority

**Source: Leading hotels in the state

***Source: Discussions with property dealers

****Source: Superintendent Engineer (Supply) Bihar State Electricity Board.

*****Source: Deputy Director, Dept. of Industries, Govt. of Bihar.

Contact InformationBihar State Credit and Investment Corporation Ltd (BICICO)4thFloor, Indira Bhawan,Ram Charitra Singh PathP.B.No.204 GPOPatna-800001Tel: + 91 612 228552, 232277Fax: + 91 612 234298Website: http://www.bicico.comEmail: bicico@vsnl.net

Bihar State Financial Corporation Fraser RoadVittiya Nigam Bhawan, Patna-800 001. Phone: 91-612-210968, 234210 Fax: 91-612-225228

Small Industries Service InstituteIndustrial EstatePatna -800 013 Tel: 0612-2262719, 0612-2262186, 0612-2262208 Fax: 0612-2261677 E-Mail: sisipat@bih.nic.in Confederation of Indian Industry (CII)M-3/24, Near Basawan Park, S.K.Puri,Patna-800001Phone No/Fax: +91-0612-6450301

AppendixExchanges rates used

Year One USD is equivalent to Rs.

2000 46.6

2001 48.3

2002 48.04

2003 45.6

2004 43.7

2005 45.2

2006 45

2007 42

BIHAR PAGE 23

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