Investment

Climate in
Bihar

www.ibef.org
Published by
 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

Executive Summary
‘Investment climate’ is a broad concept, encompassing all the
factors affecting business decisions, including profitability and
where to locate plants and other units. A good investment
climate provides opportunities and incentives for firms to invest
productively and create jobs, thus playing a key role in ensuring
sustained growth and poverty reduction.
Factors influencing 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 firms, 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 flanking 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 specific
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.
 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 defined 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 (fixed line
and mobile) is developing rapidly, while power – grossly under-
invested till recently – is seeing a huge inflow 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 filling vacancies in educational institutions, inviting private
participation in higher and technical education as well as financial
support programmes for healthcare.

stment Climate in Bihar

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.
Bihar - Select indicators

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

Official 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 refinery,
Textiles, Leather and Miscellaneous Engineering
 BIHAR PAGE 7

Economic Overview of the State

The present state of Bihar is the result of the bifurcation of the Bihar's GSDP
(USD billion)
erstwhile larger Bihar on 15th November 2000, resulting in the CAGR
creation of the new state of Jharkhand. Bihar today has an area 6.6%
13.40
12.60
of 94,163 sq km and a population of 82.88 million (2001 census). 11.60 11.90

It is the third largest state of India in terms of population. Bihar 9.10

9.70 9.80

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.
1999Ͳ00 2000Ͳ01 2001Ͳ02 2002Ͳ03 2003Ͳ04 2004Ͳ05 2005Ͳ06

The bifurcation of erstwhile Bihar resulted in substantial mineral Source: Indiastat.com

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.
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.

Bihar also has a few large industries, mostly in the public sector.
Percentage distribution of GSDP
Major public sector units include Indian Oil Corporation (which
CAGR
has an oil refinery), Hindustan Fertilizer Corporation Ltd at
Barauni and Pyrites Phosphates and Chemicals Ltd at Amjhor. TertiarySector 6.80%
49.8% 53.6%
Other industries include cotton spinning mills at Siwan, Pandaul,
SecondarySector 10.5% 7.60%
Bhagalpur, Mokamah and Gaya, and sugar mills located across the 11.8%

state. PrimarySector 39.7% 34.6% 2.40%

In addition, there are distilleries at Gopalganj, West Champaran, 2000-01 2005-06

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 figures.
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.
Source: Indiastat.com
CAGR of 7.6 per cent between 2000-01 and 2005-06.
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.

This growth has been driven by two sectors – primary (compris-
ing agriculture and livestock, forestry and logging, fishing, mining
and quarrying) and tertiary (comprising trade, hotels and restau-
rants, transport, storage and communication, financial services,
real estate and related services, public administration and other
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.
 average, as the purchasing power of people is not as high as in
Distribution of household by income
(Per cent) Bihar other developed states in the country.
India
Urban Rural

57.5
Industrial performance in Bihar
32.6
< USD 1667 46.1
12.2

USD 1668- 23.1 25.7 Key Industries

3330 26.1 32.5

USD 3331- 28.4 10.3

6667 39 16.8
• Food products/beverages
• Tobacco products
15.9 6.5
> USD 6667
22.7 4.6 • Textiles/textile products
• Leather/leather products
Source: The Market Skyline of India 2006 by Indicus Analytics
• Wood/wood products
• Paper/printing/publishing
The annual income of households is also an important indicator • Mines and minerals
of economic prosperity. Bihar has a lower share of households • Dairy
(both urban and rural) in higher income categories compared to • Tea
all-India figures. • Sugar
• Makhana (a flowering plant with edible seeds)
For example, 15.9 per cent of Bihar’s urban households and
6.5 per cent of rural households figure in the highest income Unregistered units dominate the overall industrial sector in
category of $6,667 and above, as compared to all-India figures of the state, accounting for more than half of its total income. The
22.7 per cent and 4.6 per cent, respectively. Annual Survey of Industries (ASI) 2004-05 reveals that there are
1,675 industrial units in the state. However, in terms of net value
But 32.6 per cent of Bihar’s urban households and 57.5 per cent added, food, beverages, tobacco and petroleum products account
of rural households figure in the lowest income category of less for more than 85 per cent of the total industrial income.
than $1,667, as compared to all-India figures of 12.2 per cent
and 46.1 per cent, respectively. On the other hand, the percent- Though Bihar produces about 10 per cent of India’s total output
age of households in Bihar in the middle income group – $1668- of fruits and vegetables, the state’s share in processed output is
$3330 and $3331-$6667 – is almost the same as in case of all- only 1 per cent. This clearly shows that there is enough scope to
India categories, which indicates the presence of a large potential develop this sector further.
in the consuming class.
Tea and dairy are two major industrial sectors in the state.
Other potential industries are sugar, makhana, leather, textile and
Four-wheelers Two-wheelers
handloom. Mineral production in Bihar includes pyrites, quartz-
Bihar 1% Bihar 5% ite, mica and limestone.
All-India 4% All-India 18%
Industrial centres
Television Electricity

The main industrial centres are Patna, Magadh, Muzaffarpur,

Bihar 15% Bihar 14%
Barauni, Bhagalpur, Munger, Darbhanga and Tirhut.
All-India 41% All-India 64%

According to the Department of Industries, the number of

Source: The Market Skyline of India 2006 by Indicus Analytics
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
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
 BIHAR PAGE 9

India, exporting grain, sugarcane, sesame and medium-grained Investments in Bihar

rice. It has also emerged as a big and rapidly expanding con-
sumer market, both for fast moving consumer goods (FMCG) Breakup of Investments by sector
and consumer durable items. The government plans to develop
Irrigation Mining
Patna as the second international gateway in eastern India (after 1.4%
9.4%
Kolkata) to exploit its tourism potential and for promotion of
trade and commerce with neighbouring countries in the east. Services
17.6%

Muzaffarpur district is home to several industrial units, the major

Manufacturing
ones being Prabhat Zarda, Indian Drugs & Pharmaceuticals Ltd 11.3%
(IDPL), Bharat Wagon and Engineering Ltd., Leather Develop- Electricity
ment Corporation and Muzaffarpur Dairy (a unit of the Bihar 67.0%

State Dairy Corporation). It is an also important trade centre Source: Monthly Review of states of India, CMIE March
Report 2007
for textiles, mango and litchi.

The Barauni refinery of Indian Oil Corporation Ltd (IOC) is
one of the country's biggest oil refineries. 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.
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, Cotton, Wool, Material, Metal, Rubber, Plastic, Total
Beverages Jute, Paper Machine Chemicals (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
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.
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:

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.
• Bihar Industrial Area Development Authority (BIADA) – land
that is classified/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-
fication 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 financial 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
Source: Manpower Profile, Institute of Applied Manpower Research, 2004, New Delhi; figures in parentheses are
the percentage share of Bihar employment vis a vis all-India figures

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.
 BIHAR PAGE 11

the Government or the Industrial Area Development Authority. Medical and Healthcare Facilities
The Industry Department would determine the period of con-
struction for large, medium and small scale units. The lease deed Health Indicators
would carry the condition that if the unit is not constructed
within the prescribed period, the land could be taken back. Au- Bihar All-India
thorities managing Industrial Areas and Growth Centres would Population served per
be the single contact point for clearances regarding allotment of
land. Doctor 2,363.9 1,607
Birth rate* 31 24.8
In order to expedite the process of land allotment, a number of
inter-departmental references have been minimised along with Death rate* 10.5 8.1
decentralisation of powers to the level of collectors. Collectors
maintain detailed information on all available Government land Infant mortality rate** 61 63
in the district. While the collectors are authorised to allot up
to 5 acres of Government land for industrial purpose, govern- *per thousand persons **per thousand live births
ment land in excess of this is leased to entrepreneurs with the
approval of the Empowered Committee. Life expectancy at birth(Years)
Male 61.6 64.1
Educational infrastructure Female 59.7 65.4

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. 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.
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 financial institutions and national financial institutions. Co-
operatives largely look after the requirements of the agricultural
sector, commercial banks provide finance for industry as well as
agriculture, state financial institutions help to promote industrial
development and national level institutions cater to the require-
ments of large-scale finance.

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.
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 Railways

Roads The state has an extensive and well-developed railway network

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
identified 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.
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 electrification.
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 Status Location
(USD million)
Gaya Airport New Terminal Building 9.7 Under Gaya
Project Implementation
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

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 five districts with a capacity of 44 MW, and is target-
ing a higher utilisation rate.
Abhijeet Group, a diversified 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 figures among the first five 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 fixed 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
effluent treatment plants.
BIHAR PAGE 13
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 flowers, 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 financed 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 five years and around 10,000 farm-
ers are likely to benefit.
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-certification 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)
Significant 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 five years
• Exemption of purchase tax on sugarcane for five 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 first 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.

Key Nodal Agencies
Single window clearance mechanism in Bihar
INVESTMENTS HANDLED: UNDER THE CHAIRMANSHIP OF:
Between USD STATE LEVEL
2.38 & 23.8 million INVESTMENT Industries Development
PROMOTION BOARD Commissioner
District Collector,
Lower than DISTRICT LEVEL
USD 2.38 million
COMMITTEE
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
filling up the form, helping in convening the SIPB meeting and
facilitating the process of getting final clearances with various
departments.
Udyog Mitra
Udyog Mitra, part of Industries Department, disseminates rel-
evant information to the investor pertaining to investment pro-
files 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
BIHAR PAGE 15
NODAL AGENCY:
Industries Department
(Udyog Mitra)
- State level
District Industries
Centre - district level
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 notifies 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 final 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
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.
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 greenfield
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 refinery and co-gen-
eration unit at Bharat Sugar.
Indian Gasohol Ltd

Agro–based Indian Gasohol Ltd (IGL), a company started by a group of NRIs,

plans to produce fuel alcohol for blending with petrol and diesel.
Bihar produces several types of agriculture products such as It pans to invest $299.4 million for setting up four maize-based
rice, wheat, maize, gram, oilseeds, sugarcane and jute. industrial units in Bhagalpur, Muzaffarpur, Begusarai, and Vaishali.

Sugar Industry It has proposed a further investment of $3.4 billion to set up

Status of Sugar Industry
x No. of sugar mills
x Total Cultivable land
x Land under Sugarcane
x Total Sugarcane production
x Sugar produced
x Crushing duration
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
29
(TCD). Apart from ethanol, the mills would also generate 2,000
5.5 million hectares
MW of energy out of bagasse, of which 70 per cent will be
0.23 million hectares
surplus and will be utilised by the state government for rural
129.9 million MT
electrification.
0.4 million MT
122 days Tobacco

The availability of Kendu leaves and cheap labour has helped

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.
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 first 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.

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 flourmills,
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, efficient 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
BIHAR PAGE 17
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
identified Muzaffarpur district for fund infusion for systematic
development. A National Centre for Litchi has been established
at Muzaffarpur.
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
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 fixed 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
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).
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
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
identified 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 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 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
 BIHAR PAGE 19

been accredited with ISO 9001-2000 certification 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
Century Plywood
Century Plywood, a Kolkata-based firm, 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, finance, 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.

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

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 sufficient 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.
Indian Oil Corporation’s refinery 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 refinery 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 refinery. The crude oil requirement of Indian
Oil’s subsidiary refinery at Bongaigaon is also partly transported
through the pipeline up to Barauni.

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 flagship of the MP Birla group, has proposed

setting up a $30 million, million-tonne grinding unit in Barh. The
proposal is currently being processed.
DOING BUSINESS IN BIHAR

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.

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 Identity
Number, Permanent Account
Number
Registration, Industrial
Entrepreneur's Memorandum,
Industrial Licenses
Ministry of Corporate Affairs/ Income Tax
department 1 day
District Industry Centre/ Bihar Industries
Department/ Secretariat of Industrial Assistance NA

Bihar Industrial Area Development Authority 7-21 days (90 for

Land Allotment of land (BIADA) non-industrial land)
30 days (45 days for
conversion of non-
Permission for land use Revenue and Land Reforms Department Industrial land)
Registration with Inspector of
Factories under Factories Act,
Factories and Registration with Inspector of Boilers Office of the Chief Inspectorate of Factories,
Boilers under Boilers Act Office of Chief Inspector of Boilers 30 days
State pollution control board and Ministry of
Environment Site environmental approval environment and forests 60 days
No Objection Certificate and consent
to establish under Water Act 1974,
Air Act 1981 and Environment State pollution control board and Ministry of
Protection Act 1986 environment and forests 30 days
Approval of construction activity and
Construction building plan Town and country planning authority 7 days
Health & Health clearance, Safety Certificate State Health Society, Electrical Inspectorate
Safety from Chief Electrical Inspector 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

Registration under states sales tax

act, Value added tax and central and Sales tax department, Central and State excise
Taxes state excise act 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 USD 143 to USD 281 per month for a 2,000 square feet house
space*** (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 Information Appendix
Bihar State Credit and Investment Corporation Ltd Exchanges rates used
(BICICO)
4thFloor, Indira Bhawan, Year One USD is equivalent to Rs.
Ram Charitra Singh Path
P.B.No.204 GPO 2000 46.6
Patna-800001 2001 48.3
Tel: + 91 612 228552, 232277
Fax: + 91 612 234298 2002 48.04
Website: http://www.bicico.com
2003 45.6
Email: bicico@vsnl.net
2004 43.7
Bihar State Financial Corporation
2005 45.2
Fraser Road
Vittiya Nigam Bhawan, 2006 45
Patna-800 001.
2007 42
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
 BIHAR PAGE 23

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IBEF shall in no way, be liable for any direct or indirect damages that may
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ance placed guidance taken from any portion of this publication.
‘India Brand Equity Foundation (IBEF) is a public-private partnership between the
Ministry of Commerce & Industry, Government of India, and the Confederation
of Indian Industry. It aims to effectively present the India business perspective
and leverage business partnerships in a globalising market-place.

INDIA BRAND EQUITY FOUNDATION

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INDIA

Tel: +91 124 401 4087, 4060 - 67

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May 2008