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From negative growth five years ago, how did Bihar swing to 11.03% growth?

The substantial increase in plan expenditure in the last four years has been the main factor for Bihar’s turnaround. For 14 years (1990-2004), the total plan expenditure was only Rs 25,000 crore. In fact, under the Lalu Prasad-Rabri Devi regime, the average spend was just Rs 1,000 crore. Small plan size apart, even that money was not spent properly. On the other hand, in four years, we have spent Rs 51,000 crore, including Rs 16,000 crore allocated for 2009-10.

Second, the grants under centrally sponsored schemes would lapse as the state could not match the funds (from the Centre). Besides, the fund release happens only when utilisation certificates are shown and demands sent on time. We have been able to take and utilise central funds for all centrally sponsored schemes such as Indira Awaas Yojana, Sarva Shiksha Abhiyan and others.

Third, investors were scared of coming to Bihar due to the poor law and order situation. That is now a thing of the past. In fact, investors don’t even think that is an issue anymore. Due to the improved law and order situation there has been a 377% increase in tourist footfalls between 2006 and 2008. We are now almost at par with Goa in attracting tourists. In Bodhgaya, for instance, we have an international airport, which has 25 weekly flights from Myanmar, Bhutan, Bangkok and Colombo. There is a lot of construction in the state due to our policies. For instance, Bihar’s consumption of cement saw a 28% hike for the quarter starting April, while the national average was 9%.

The transport industry had collapsed as road tax and other duties were raised many times. However, as the transport industry has grown by 36%, the sale of trucks has grown by 150%. The total number of mobile connections has grown from 47 lakh in March 2007 to 2.06 crore now.

All these indicate how growth is happening in Bihar.

How did Bihar get rid of its ‘investor unfriendly’ tag?

We have enacted more than 50 laws. For the first time, Bihar has a single-window policy for investors, a new industrial policy, a state investment promotion board and so on. Multilateral agencies like the Asian Development Bank and the United Nations Development Programme are showing special interest in Bihar, and for the first time, have lent us Rs 700 crore.

The state is not what it was four years ago. It’s changing. Now, India is coming to Bihar; it was the reverse some years ago. We want investors to come to Bihar. And, we will give all the incentives that other states are providing.

There are special incentives for specific industries like sugar. In the last four years, we have received investment proposals to the tune of Rs 1,33,000 crore. Out of this, Rs 90,000 crore has been in the power sector and most of the plans have been cleared by the Cabinet.

But none of them have taken off…

We could have implemented 20,000 MW of power. But, we haven’t been able to implement any of the proposals as the Centre is not giving us any coal linkage. After Bihar’s bifurcation, all the coal mines went to Jharkhand.

Also, the thermal power stations need water. But when we went to the Centre for environment clearance, one more condition was imposed: not to use water from the Ganga. The reason is that there are international commitments with Bangladesh on the Farakka barrage. Though UP and Uttarakhand are using the Ganga’s water, we cannot.

Similarly, we have received proposals to the tune of Rs 20,000 crore for setting up ethanol plants. Ethanol is prepared from sugarcane juice and is blended with petrol. The Centre, however, issued a circular that requires ethanol to be prepared from molasses (a sugarcane by-product), not directly from sugarcane juice. So, even these proposals are pending.

How can companies pump in money if the Centre’s policies put in constraints? Reliance Industries bought the Motipur sugar mills for ethanol conversion. Hindustan Petroleum Corporation bought two sugar mills and is investing Rs 1,000 crore in them. By next November, they will be starting their operations in Sugauli and Lauria. Basically, food-processing plants are coming up in Bihar. Till now, investments worth Rs 1,000 crore have fructified.

Remember, during the Lalu-Rabri regime, nobody even dared to come to Bihar. But now, you have the Ambanis, Piramals and other biggies coming in. This is a major shift.

We have achieved 11.03% growth despite the lack of support from the Centre. If the Centre changes its stance, then Bihar can sustain this growth.

Haven’t you put forward your concerns to the Centre?

Chief Minister Nitish Kumar has held parleys with the Prime Minister and other ministers. Our main demand is to declare Bihar as a ‘Special Category State’. This status provides many exemptions such as on excise tax and income tax. At present, 11 states (Northeastern states, Assam, Himachal Pradesh and Uttarakhand) come under this category. Bihar too is eligible. Nobody wants to come to Bihar because there is no raw material and poor infrastructure.

During the Lok Sabha elections, soon after the Chief Minister made this demand, all parties (including the Congress) moved a resolution in the Assembly supporting this. Congress party’s General Secretary Digvijay Singh also announced that. However, as Congress could win only two Lok Sabha seats from the state, they are now backtracking on the issue.

If India is to achieve a growth rate again of more than 9%, then the poor states with large populations such as Uttar Pradesh and Bihar should be given more money. Then, hundreds of industries will come to Bihar.

But you still have a power shortage...

Once investments come in, we will be able to buy power from other sources. All the coal mines in Jharkhand are near Bihar. Also, there was a proposal for a nuclear power plant in Nawada district under the Indo-US civil nuclear deal. To some extent, UPA-1 was co-operating with Bihar. But UPA-2 is completely uncooperative.

Is it because Lalu Prasad and Ramvilas Paswan are not part of UPA-2?

No. Lalu Prasad would put up obstacles during UPA-1. Now, the Congress seems to be taking ‘revenge’ for its poor show in the general elections. Their chances in the forthcoming Assembly polls are poor. However, any development process should not be stifled due to political reasons.

In 2006, you spoke of setting up a ‘land bank’ for investors. With the Centre revisiting the land acquisition policy, what are your demands?

Bihar has a very progressive land acquisition policy. We have fixed ‘circle rates’, where the maximum value for property in that area is fixed. It can’t be registered for more than that. We are providing farmers 50% more than the ‘circle rates’. We are also providing incentives for the labourers working in the field. Bihar has very fertile land with small landholdings and fragmented ownership.

You’ve made a number of reforms in the budgeting process. What has changed?

Our first Budget, passed in March 2006, was Bihar’s first full budget in 15 years. Till then, the Budget was passed in two instalments—March and July. So, spending starts early now. There has been a decentralisation of financial powers. Previously, any scheme over Rs 25 lakh needed Cabinet approval. Now, only schemes above Rs 10 crore go to the Cabinet. We enacted the Fiscal Responsibility and Budget Management (FRBM) Act, and now we have outcome, performance and gender budgeting. We are monitoring expenditure and revenues constantly, and are submitting a report to the legislature on a quarterly basis. The Treasury has been computerised, and at the click of a mouse I can see the condition of our treasury in real-time. Even the pending files with each officer in the Finance Department can be checked.

Also, the maximum collection earlier for excise on liquor was about Rs 250 crore. We changed the excise policy, and this year we expect to collect Rs 1,000 crore.

Coming back to the growth rate, while a low base can show high percentage growth, when do you see Bihar’s GDP becoming one of the largest in the country?

It is difficult and I do not want to be an idealist. If our growth continues to be 11% for the next 15 years, then Bihar will be at par with Maharashtra currently. In 15 years, Maharashtra’s GDP will probably be thrice what it is today. So, the backward states need more help. There is a huge gap between our per capita developmental expenditure and the national average. We have asked the 13th Finance Commission to bridge this gap. We want Bihar to be a developed state by 2015.

But the per capita expenditure on the social sector is low and the social development index is still abysmal…

We have more than two-dozen schemes for the social sector such as pension for every widow. Under the Kanya Suraksha Yojana, Rs 2,000 per girl child will be deposited with the UTI and under the Kanya Vivah Yojana, Rs 5,000 per girl will be given for the marriage of girls from below poverty line (BPL) families. Changes are happening and institutions are being built from nothing. It will take time for the results to show.

What is the employment situation in the state? Are centrally sponsored schemes making a difference here?

We have created three lakh jobs in the government sector, including the appointment of 2.12 lakh teachers. That apart, the Centre should scrap most centrally sponsored schemes as there is no flexibility for most of them. One scheme can’t fit throughout the country. Under the Indira Awaas Yojana they are providing Rs 35,000 to each BPL family for building houses. However, in Bihar’s flood-prone areas, different parameters are required. In NREGA too, there are fixed guidelines. Instead of binding states with different schemes, the states should be allowed to have their own schemes to address their specific needs. There should only be half a dozen centrally sponsored schemes; the rest of the money should be given to the states.

How will you address the pathetic delivery system?

The implementation and delivery mechanism is very poor in Bihar. We have come out with a number of administrative reforms such as reorganisation of departments, computerisation, grievance cells and the like. But, the bureaucracy has not been able to cope with the speed that we are bringing about changes. Else, much more could have been achieved.

Also, we have a shortage of doctors, engineers and other skilled people. For the first time, a technical university has been started in the state.

That aside, there needs to be a rethink on the way poverty alleviation programmes, such as the public distribution system, are implemented. There are a lot of leakages from the procurement of the grains to the supply at the fair price shops. The solution is to go in for a direct cash transfer to the poor by opening bank accounts. This will eliminate many of the delivery system woes. We have already started a pilot project under NREGA in Patna. We were providing bicycles and clothes to students. Instead, now we are putting Rs 2,000 in the account of ten lakh students. This year, we are planning to provide Rs 500-700 each to one crore students.

Bihar’s farmers have not been getting a good price for their produce…

Bihar does not have a proper procurement mechanism like Haryana or Punjab. Procurement started only seven years back. Last year, we procured 12 lakh metric tonnes of rice, which is the highest for the state. We are not depending only on the Food Corporation of India. We are also strengthening our procurement agencies at the village level.

You have expressed reservations about the new GST regime…

All states favour the new GST regime, but none wants a revenue loss. Many issues have to be resolved. It is impossible to implement the new GST regime by this April. It could, however, be implemented by next April if the same momentum is kept up.