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www.ibef.org

Investment

Climate in

Bihar

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Published by

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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

AGROBASED ........................................................................................................................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

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Investment climate is a broad concept, encompassing all thefactors 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 Indias 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 thecreation 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 states

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 Indias 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 states

factor advantages, as well as other industries like IT and enter-

tainment.

Executive Summary

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BIHAR PAGE 5

Another initiative alongside the Industrial Incentive Policy 2006was 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 responsibil ities.

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 lineand mobile) is developing rapidly, while power grossly under-

invested ti ll 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.

tment Climate in Bihar

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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

States share in Indias 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

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BIHAR PAGE 7

The present state of Bihar is the result of the bifurcation of theerstwhile 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 Indias 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 years fi gures.

Bihars 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 states 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 in2004-05.

Economic Overview of the State

9.109.70 9.80

11.60 11.9012.60

13.40

199900 200001 200102 200203 200304 200405 200506

Bihar's GSDP

(USD billion)

Source: Indiastat.com

CAGR6.6%

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

SecondarySectorPrimarySector

7.60%

2.40%

CAGR

6.80%

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

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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 Bihars 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 Bihars 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 populations 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--vis the all-India

average, as the purchasing power of people is not as high as inother 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 Indias total output

of fruits and vegetables, the states 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

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BIHAR PAGE 9

India, exporting grain, sugarcane, sesame and medium-grainedrice. 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 centrefor 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 MarchReport 2007

Breakup of Investments by sector

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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 Indias public sector and a mere 3 percent 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 BiharEconomic 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 Profile, Institute of Applied Manpower Research, 2004, New Delhi;

figures in parentheses arethe percentage share of Bihar employment vis a vis all-Indiafigures

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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 landin 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 institutions

Source: 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. Bihars

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-India

Population served per

Doctor 2,363.9 1,607

Birth 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 64.1

Female 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.

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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-west4-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

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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 andeffl 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 ofready-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

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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 monthlyguarantee electricity bill, discontinuation of land registration

charges and reimbursement of Value Added Tax (80 per cent inthe 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.

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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 hydelpotential in Bihar. The company is moving ahead to achieve its

STATE LEVELINVESTMENT

PROMOTION BOARD

UNDER THE CHAIRMANSHIP OF:

Industries DevelopmentCommissioner

District Collector,

Industries Department(Udyog Mitra)- State level

District IndustriesCentre - district level

NODAL AGENCY:

DISTRICT LEVEL

COMMITTEE

INVESTMENTS HANDLED:

Lower thanUSD 2.38 million

Between USD2.38 & 23.8 million

Single window clearance mechanism in Bihar

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objectives of identifying potential for hydro projects, planningand 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 APEDAto 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.

Agrobased

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 Groups 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 mil lion hectares

Total Sugarcane production 129.9 million MT

Sugar produced 0.4 million MT Crushing duration 122 days

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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. COMFEDs 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

199192 to 200506. It contributes 9 per cent of the total milkprocessed 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 is336,852 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 Bihar

Year 2002-03 2003-04 2004-05 2005-06

Quantity in MT 152 388 624 900

Source: Economic Survey of Bihar

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opportunities exist in contract farming as well as processing andexports (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, Bhagalpur

Siwan Co-Operative Spinning Mill, Siwan

Pandaul Co-Operative Spinning Mill, Pandaul (Madhubani)

Bihar Spun Silk Mill, Bhagalpur

Leather Industry

Leather-based industries have vast potential in the state owing

to Bihars 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 Ltd

Bharat 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 97.4

Bihar 16850 50550 97.4

Source: Economic Survey of Bihar

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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 Indias 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. Theproposal 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 Corporations 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 Oils Barauni refi nery. The crude oil requirement of Indian

Oils subsidiary refi nery at Bongaigaon is also partly transported

through the pipeline up to Barauni.

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The Industries Department acts as the single point contact for all investmentproposal 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 NA

Application for Director IdentityNumber, Permanent AccountNumber

Ministry of Corporate Affairs/ Income Taxdepartment 1 day

Registration, IndustrialEntrepreneur's Memorandum,Industrial Licenses

District Industry Centre/ Bihar IndustriesDepartment/ Secretariat of Industrial Assistance NA

Land Allotment of landBihar Industrial Area Development Authority(BIADA)

7-21 days (90 fornon-industrial land)

Permission for land use Revenue and Land Reforms Department

30 days (45 days forconversion of non-Industrial land)

Factories andBoilers

Registration with Inspector ofFactories under Factories Act,

Registration with Inspector of Boilersunder Boilers Act

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

Environment Site environmental approvalState pollution control board and Ministry ofenvironment and forests 60 days

No Objection Certificate and consentto establish under Water Act 1974,Air Act 1981 and EnvironmentProtection Act 1986

State pollution control board and Ministry ofenvironment and forests 30 days

ConstructionApproval of construction activity andbuilding plan Town and country planning authority 7 days

Health &Safety

Health clearance, Safety Certificatefrom Chief Electrical Inspector

State Health Society, Electrical Inspectoratedepartment

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 taxact, Value added tax and central andstate excise act

Sales tax department, Central and State excisedepartments 7 days

Source: Industries Department, Government of Bihar

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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.

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Contact InformationBihar State Credit and Investment Corporation Ltd

(BICICO)

4thFloor, Indira Bhawan,

Ram Charitra Singh Path

P.B.No.204 GPO

Patna-800001

Tel: + 91 612 228552, 232277

Fax: + 91 612 234298

Website: http://www.bicico.com

Email: bicico@vsnl.net

Bihar State Financial CorporationFraser Road

Vittiya Nigam Bhawan,

Patna-800 001.

Phone: 91-612-210968, 234210

Fax: 91-612-225228

Small Industries Service Institute

Industrial Estate

Patna -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-800001

Phone 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

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BIHAR PAGE 23

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