Investment climate of a state is determined by a mix of factors

Transcription

1 BIHAR April

2 BIHAR April 2010 Investment climate of a state is determined by a mix of factors Skilled and cost-effective labour Labour market flexibility Labour relations Availability of raw materials and natural resources Procedures for entry and exit of firms Industrial regulation, labour regulation, other government regulations Certainty about rules and regulations Security, law and order situation Resources/Inputs Incentives to industry Tax incentives and exemptions Investment subsidies and other incentives Availability of finance at cost-effective terms Incentives for foreign direct investment (FDI) Profitability of the industry Investment climate of a state Regulatory framework Physical and social infrastructure Condition of physical infrastructure such as power, water, roads, etc. Information infrastructure such as telecom, IT, etc. Social infrastructure such as educational and medical facilities 2

3 BIHAR April 2010 Contents Advantage Bihar State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Bihar 3

4 ADVANTAGE BIHAR Bihar State profile Covering an area of 94,163 sq km, Bihar is located in the eastern part of India. The state has a population of 83 million and is one of the most densely-populated states in the country. It shares borders with Uttar Pradesh, Jharkhand and West Bengal and international border with Nepal. The state has 38 administrative districts. Patna is the capital city. Gaya, Bhagalpur, Muzaffarpur and Darbhanga are other key cities in the state. The Ganges, one of the major rivers in the Indian sub-continent, flows through the state, making Bihar s land extremely fertile for agriculture. The four agro-climatic seasons and fertile soil of Bihar support cultivation of a wide range of crops. The most commonly-spoken languages of the state are Hindi, English, Urdu and Bhojpuri. 4 Source: Maps of India

5 ADVANTAGE BIHAR Advantage Bihar (1/2) High economic growth The economy of the state has grown at around 15.2 per cent from to The state provides investment opportunities in sectors such as agro-based industry, food processing, sugar, power, leather, manufacturing and tourism. Policy incentives The state offers a wide range of policy incentives for businesses under the Industrial Policy, The state also provides incentives for the sugar, renewable energy, food processing and the tourism sectors. Source: Maps of India 5

6 ADVANTAGE BIHAR Advantage Bihar (2/2) Rich labour pool The state has a large base of industrial labour, making it an ideal destination for wide range of industries. Traditionally, a prominent seat of education, Bihar has a number of reputed educational institutions in several fields. Location advantage The state enjoys a unique location-specific advantage because of its proximity to the vast markets of Eastern and Northern India, access to the ports such as Kolkata and Haldia, raw-material sources and mineral reserves from the neighbouring states. Source: Maps of India 6

7 ADVANTAGE BIHAR Bihar in figures Parameter Bihar All-states Source Economy GSDP as percentage of all states GSDP CMIE, , current prices Average GSDP growth rate (%) CMIE, to Per capita GSDP (US$) CMIE, Physical infrastructure Installed power capacity (MW) ,996.4 Central Electricity Authority, as of March 2009 Broadband subscribers (No) 63,305* 4,981,976 As of October 2008 National highway length (km) 3,642 70,548 Ministry of Road Transport and Highways, Airports (No) Industry sources Social indicators Literacy rate (%) Census of India, 2001 Birth rate (per 1,000 population) Central Bureau of Health Intelligence, 2007 Ease of doing business Outstanding investments (US$ billion) ,709.7 CMIE, as of December 2008 Industrial infrastructure PPP projects (No) *Includes Jharkhand PPP: public-private partnership 7

8 ADVANTAGE BIHAR Key industries with policy thrust and factor advantages High Industry attractiveness matrix Sugar Food processing Policy thrust Medium Textiles/ handlooms Minerals Tour ism Leather Low Medium *Factor advantage High *Factor advantages include benefits due to geographical location and availability of factors like talent pool, natural resources and capital 8

9 BIHAR April 2010 Contents Advantage Bihar State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Bihar 9

10 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE Socio-economic snapshot of Bihar Parameters Bihar Capital Patna Geographical area (sq km) 94,163 Administrative districts (no) 38 Population density (persons per sq km) Total population (million) 83.0 Male population (million) 43.2 Female population (million) 39.8 Decadal population growth rate (%) 28.4 Sex ratio (females per 1,000 males) 919 Literacy rate (%) 47.0 Male (%) 59.7 Female (%) 33.1 Average life expectancy (years) Male (years) 61.6 Female (years) 59.7 Sources: CMIE, Census

11 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE Bihar s GSDP At current prices, the Gross State Domestic Product (GSDP) was US$ 28.7 billion. In Between March 2000 and March 2009, the average annual GSDP growth was 11.5 per cent. The state had a robust growth of 15.2 per cent between March 2005 and March Bihar s GSDP (US$ billion) CAGR 11.5% Source: CMIE 11

12 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE Bihar s NSDP In , the Net State Domestic Product (NSDP) of Bihar was about US$ 26.0 billion. The average NSDP growth rate between and was about 11.3 per cent. This growth has been driven by the services sector including trade, real estate, hospitality and others Bihar s NSDP (US$ billion) CAGR 11.3% Source: CMIE 12

13 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE The tertiary sector has an increasing share in Bihar s economy At US$ 17.3 billion, the tertiary sector contributed 67.4 per cent to the GSDP (at current prices) in It was followed by the primary sector, contributing US$ 7.0 billion (27.2 per cent), and the secondary sector contributing US$ 1.4 billion (6.8 per cent). Tertiary sector is the fastest growing sector. It registered a CAGR of 12.9 per cent from to This growth has been supported by the trade, real estate and hospitality sub-sectors. Percentage distribution of GSDP 100% CAGR 80% % % 40% % 20% % 0% Primary Sector Secondary Sector Tertiary Sector Source: CMIE 13

14 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE Per capita GSDP Bihar s per capita GSDP increased almost 2.3 times from US$ 135 in to US$ 303 in A robust tertiary sector has helped Bihar increase its average per capita GSDP by over 9 per cent between and (US$) Per capita GSDP At 13.4 per cent, the state had robust growth in per capita GSDP between March 2005 and March The per capita GSDP has more than doubled during this period. Source: CMIE 14

15 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE Distribution of households by income (1/2) The per capita income of Bihar was US$ 303 in The distribution of households by socioeconomic classification (SEC) indicates that a significantly large portion of Bihar s population falls in the low education and unskilled categories, although there is some concentration at the self-employed and junioremployee levels. R4 R3 R2 R1 Percentage distribution of households in rural areas by SEC* Bihar All India Rural E2 E1 D C B2 B1 A2 A1 Percentage distribution of households in urban areas by SEC* Source: BW Marketing Whitebook, * See Annexure for SEC categories Bihar All India Urban 15

16 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE Distribution of households by income (2/2) In terms of ownership of household goods and basic amenities such as sewing machines, in-house toilets, clocks and ceiling fans, rural Bihar lags as compared to all-india levels. Percentage of rural population owning household goods and basic amenities Source: BW Marketing Whitebook,

17 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE Key industries in Bihar The natural resources and policy incentives support agro-based sector, which accounts for around 50 per cent of large- and medium-scale industries in terms of gross value added. There are 263 large and medium industries, a majority of which are located in Patna. Tirhut is the other major industrial centre. The unorganised sector accounts for around 65 per cent of the manufacturing output of the state; unregistered units account for one-third of the total. Key industries in Bihar Food and beverages Rubber and plastics Transport equipment Chemicals Tobacco Textiles Leather Paper, printing and publishing Mines and minerals Dairy Tea Sugar 32.7% 17.1% Industrial distribution in Bihar 17.9% 32.3% Source: Economic Survey of Bihar, Food,beverage,tobacco Cotton, wool, jute, paper, l eather Rubber, plastic, chemicals Material, metal, machine, t ransport, equipments 17

18 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE Bihar is one among the three large producers of maize and jute In , the total production of the major crops in the state was over18.2 million tonnes. Sugarcane and rice, together, accounted for 61 per cent of total crop production. They were followed by wheat, maize and potato. In , Bihar was one among the three largest producers of maize, jute and mesta in the country. Crop Annual production ( 000 tonnes) Sugarcane 5,960.0 Rice 4,990.0 Wheat 3,910.0 Maize 1,720.0 Potato 1,178.1 Jute and mesta* Rapeseed and mustard 90.0 Gram 50.0 Arhar 40.0 Sunflower seed 30.0 Tobacco 16.1 Castor 2.0 *A variety of jute Source: CMIE 18

19 STATE ECONOMY AND SOCIO-ECONOMIC PROFILE Investments As of December 2008, total outstanding investments in Bihar were US$ 20.8 billion. Break-up of investments by sector The electricity sector accounted for the largest share of investments (64.1 per cent), followed by services (15.7 per cent) and manufacturing (15.4 per cent). 15.7% 4.1% 0.2% 15.4% 0.5% Manufacturing Between December 2005 and December 2008, 164 investment proposals were approved by the State Investment Promotion Board (SIPB). Mining Electricity Services Irrigation Of these, 15 have been completed and are in operation, one is ready to commence operations and 49 are at advanced stages of implementation. 64.1% Construction As of December 2008 Year SIPB approved proposals (No) Cumulative No Source: CMIE (up to January 2007) (up to December 2007) (up to December 2008) Source: Economic Survey of Bihar,

20 BIHAR April 2010 Contents Advantage Bihar State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Bihar 20

21 INFRASTRUCTURE STATUS Road network Bihar has 28 national highways covering 3,642 km. The total pucca road length is 46,000 km, of which 60 per cent are village roads, the remaining being district and state roads and national highways. The east-west, four-lane, high-speed corridor and the golden quadrilateral road passes through Bihar. Under National Highway Development Plan (NHDP-III), 1,105 km of national highways have been identified for upgrading to super-highways. According to the state plan, the budgeted outlay for roads and highways is US$ 576 million for , up from US$ 541 million for Source: Maps of India 21

22 INFRASTRUCTURE STATUS Railway network Hajipur in Bihar is the headquarter of the East- Central Railway. The state s main railway junctions are at Patna, Gaya, Muzaffarpur, Katihar and Samastipur. More than US$ 1.1 billion of investment has been planned for the modernisation of the railways in Bihar, including gauge-conversion, doubling of lines and electrification. Several link-lines, such as Muzaffarpur- Samastipur-Barauni-Katihar and Muzaffarpur- Chapra-Siwan, have been converted to broad gauge from metre gauge. Source: Maps of India 22

23 INFRASTRUCTURE STATUS Airports and waterways (1/2) Airports Bihar has two domestic airports, located in Patna and Gaya. Most district headquarters have airstrips or aerodromes; small air taxi or charter services are available from Patna. Several domestic airlines connect Patna to Delhi, Kolkata, Mumbai, Lucknow and Ranchi. Domestic airport Source: Maps of India 23

24 INFRASTRUCTURE STATUS Airports and waterways (2/2) Waterways The 1,620 km stretch of the river Ganges that flows between Allahabad in Uttar Pradesh and Haldia in West Bengal has been declared National Waterway 1 and is being developed for navigation by the Inland Waterways Authority of India. Patna has a low-level fixed terminal for handling containers. The National Inland Navigation Institute has been set up in Patna to train vessel crews. It has been proposed that waterways be used to deliver coal to power plants located on the river-side. Source: Maps of India 24

25 INFRASTRUCTURE STATUS Telecom infrastructure Bihar has a tele-density of 22.2 per cent. As of March 2009, there were 21.1 million subscribers as compared to 11.8 million in Of these, 20.1 million were wireless subscribers and one million were wire-line subscribers. As of March 2009, the state had 67,160 public call offices and 9,057 post offices. Telecom infrastructure in Bihar Parameter No of telephone exchanges 1,235 1,223 No of telephone connections (million) No of wire line connections (million) No of mobile phone (million) Tele-density (per 100 population) Major telecom operators in Bihar Bharat Sanchar Reliance Communications Nigam Limited (BSNL) Idea Cellular Bharti Airtel Tata Teleservices Vodafone Essar Aircel Uninor S Tel Source: Department of Telecommunication, Government of India Source: Cellular Operators Association of India 25

26 INFRASTRUCTURE STATUS Power As of March 2009, Bihar had total installed power generation capacity of MW, all owned by the state utilities. The total installed power capacity comprised of 540 MW of coal based power plants and 50.4 MW of hydropower plants. Apart from the state and private sectors, NTPC, the central sector operator, had plants of another 2,340 MW for thermal power generation in the state. Bihar has 63 power grids across seven transmission circles, which are supervised by the Bihar State Electricity Board Installed state and private capacity (MW) Source: Central Electricity Authority 26

27 INFRASTRUCTURE STATUS Urban infrastructure Under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), eight projects costing US$155 million have been sanctioned for the urban centres such as Patna and Gaya. The key areas of development are solid-waste management system, water supply and sewage. City Water supply Solid-waste management Sewage Patna Present per capita water supply of 107 lpcd is planned to be increased to 145 lpcd. US$ 116 million sanctioned for Patna and Danapur area for improvement of water supply. Gaya Total water supply in the city is 2.7 mld. US$ 7.3 million sanctioned for Gaya to improve water supply. Solid-waste generated in the city is 646 tpd. US$ 10.5 million sanctioned for improvement of solid-waste management. Solid-waste generated in the city is 15.5 tpd. Planned investment of US$ 2 million for solid-waste management. Around 170 mld of sewage generated, of which 109 mld is treated. Planned investment of US$ 96.5 million for improvement of sewage management. US$ 20.9 has been sanctioned for improvement of sewage management. lpcd: litre per capita per day, mld: million litre per day, tpd: tonnes per day. Source: Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Ministry of Urban Development, Government of India 27

28 INFRASTRUCTURE STATUS Key public-private partnership projects Project name Sector PPP type Project cost (US$ million) Stage Kosi bridge project Roads BOT-Annuity 90.9 Construction Ratu road commercial complex Urban development BOT-Annuity 0.9 Operating BOT:Build-operate-transfer Source: pppindiadatabases.com 28

29 INFRASTRUCTURE STATUS Education sector According to the Census 2001, the literacy rate in Bihar was 47 per cent. In , total number of students enrolled in primary and upper primary (up to class VII) schools was 15 million; an increase of over 34 per cent since In , the gross enrollment ratio (GER) among years old was 12.8 which is lower than national average of The prestigious Indian Institute of Technology (IIT) has been established in Patna in The State Government has offered land at Bihta in Patna to set up a campus for the institute. The Aryabhatt Gyan Vishwavidyalaya is being established in Bihar. All engineering and management institutes in the state will be affiliated to the university for development. Education infrastructure in Bihar Universities/deemed/open universities: 13 Research institutions: 11 Government-aided colleges: 259 Private colleges: 245 Engineering colleges: 7 Medical colleges: 23 Teacher training colleges: 15 Other educational institutions: 63 Source: Economic Survey of Bihar, Reputed technical institutes in Bihar Indian Institute of Technology, Patna National Institute of Technology, Patna National Institute of Fashion technology, Patna 29

30 INFRASTRUCTURE STATUS Health infrastructure Bihar has around 11,107 health centres of various categories. There are around 415 rural primary health centres (PHC), 69 urban PHCs, 1,035 additional PHCs and 70 referral hospitals. On an average, there are 130 health centres for a population of one million. At the district level, there is a wide variation in health coverage. Government initiatives have improved healthcare delivery in the state. Out patient department (OPD) turnout in the government hospitals in rural Bihar has increased from 39 patients per day in 2006 to 4,380 patients per day in Health indicators Persons served per doctor 20,000 Birth rate* 29.4 Death rate* 7.3 Infant mortality rate** 56 Life expectancy at birth (years) Male 61.6 Female 59.7 *Per thousand persons ** Per thousand live births Sources: Economic Survey of Bihar, , Ministry of Health and Family Welfare, Government of India. Government initiative in the health sector Increase in sanctioned manpower in departments such as Medical, Public Health and Family welfare. Higher level of personnel appointments and training. Involving private sector in support services related to cleaning, pathology and radiology. Free drug distribution and indoor treatment. 30

31 INFRASTRUCTURE STATUS Cultural infrastructure According to the Sports Policy, 2007, the State Government will take various initiatives to promote sports in the state by augmenting sports infrastructure, providing facilities for coaching and supporting the promising players. An international conclave on Experience Buddhism - In the land of its origin was organised to give major thrust to cultural tourism and explore potential related to the Buddhist circuits in India, especially in Bihar. Bihar Government has released a Cultural Policy in 2004, the purpose of which is to preserve and promote local culture. There are 19 museums in the state and the State Government has taken steps for their development. Major museums in Bihar Patna Museum, Patna Chandra Dhari Museum, Darbhanga Gaya Museum, Gaya Nardhaha Museum, Nawada Bhagalpur Museum, Bhagalpur Maharaja Lakshimshwar Sing Museum, Darbhanga Sitaram Upadhya Museum, Buxar Bihar Sharif Museum, Nalanda Chandra Sekhar Singh Museum, Jamui Ramchandra Shahi Museum, Muzaffarpur Source: Youth, Art & Culture Department, Government of Bihar 31

32 INFRASTRUCTURE STATUS Industrial infrastructure (1/3) The Bihar Industrial Area Development Authority (BIADA) is responsible for promoting and assisting the rapid development of industries in the industrial areas and estates. In order to provide quick services to entrepreneurs, operations of BIADA has divided in four regions Patna, Muzaffarpur, Darbhanga, Bhagalpur. Regional offices, under the guidelines of head office, develop industrial area, industrial growth centres and implement projects Region Industrial area (No) Total Land (Acre) Vacant Land (Acre) Largest Vacant Land (Acre) Patna Bhagalpur Darbhanga Muzaffarpur Source: BIADA 32

33 INFRASTRUCTURE STATUS Industrial infrastructure (2/3) BIADA is developing industrial growth centres across the state, which will have the infrastructure to promote industries in sectors such as agro-processing, light engineering, electronics, repairs and servicing and garments. The other projects planned by BIADA are as follows: Establishment of food park at Begusarai (100 acres) and Hazipur (100 acres). Industrial growth centres in Bihar Khalgaon Begusarai Aurangabad Gidha Maranga (Purnia) Khagaria Source: Economic Survey of Bihar, Establishment of mega industrial park at Bihta (100 acres) and Hazipur (100 acres). Implementation of District Rural Industries Project in six districts. Construction of an integrated textile park. 33

34 INFRASTRUCTURE STATUS Industrial infrastructure (3/3) Centres Patna Tirhut Muzaffarpur Barauni Bhagalpur Gaya Industries Major agricultural centre of trade exporting grain, sugarcane, sesame and medium-grained rice; has also emerged as a manufacturing hub in Bihar with the highest number of industrial units. Has the second-highest number of units in the state; food/beverage processing and manufacturing units are located here. Important trade centre for cloth; famous for exporting fruits, particularly, mango and litchi. Has major industrial units including those of Indian Oil Corporation s refinery; a thermal power station has been proposed to be set up. Famous worldwide for tussar silk; trading of agricultural produce and cloth is an important economic activity. Other major industries include rice, sugar milling and wool weaving. Major weaving centre, important tourist hub Industrial clusters in Bihar Manufacturing Textile/Sericulture Sugarcane Agro-based industries (except sugarcane) Source: Economic Survey of Bihar,

35 INFRASTRUCTURE STATUS Infrastructure investments As of December 2008, the total investments in Bihar s infrastructure sector were over US$ 6.3 billion. Over 81 per cent of investments in infrastructure were in the area of power generation and distribution. About 17 per cent of the investments were in the railways sector. Other infrastructure sectors where investments have been made are road, oil, gas and air transport. Infrastructure type Investments (US$ million) Power* 5,199.7 Roads 66.3 Oil and Gas 7.4 Railway 1,101.8 Air transport 0.8 Total 6,375.9 *Generation and distribution Source: CMIE 35

36 BIHAR April 2010 Contents Advantage Bihar State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Bihar 36

37 STATE POLICIES AND INCENTIVES Sector specific policies (1/6) Industrial Policy, 2006 Aim: To establish new industries and revive sick units, provide conducive environment to attract domestic and foreign investment and provide environment for a balanced development of the state. Key initiatives and objectives: Creation of corpus fund along with commercial bank and industry association for the revival of sick -and closed-units. A state-level committee will decide on concessions and/or exceptions to be provided for rehabilitation of concerned units. Single-window clearance system to be provided. Infrastructure Development Enabling Act, 2006, for development of infrastructure through private participation. Establishment of land bank to meet requirements of industries and development schemes. Enhancement of competitiveness of industrial units through pre- and post-production incentives. Incentives to handloom sector industries. To develop handicrafts, handloom, khadi, silk and village industries. Provision of self-certification to simplify inspection of factories. 37

38 STATE POLICIES AND INCENTIVES Sector specific policies (2/6) Industrial Policy, 2006 (continued) Key incentives: Exemption from stamp duty and registration fee; provision of reimbursement of value-added tax (VAT). Reimbursement of 50 per cent of cost on preparation of project report, up to US$ 1,630. Incentives on purchase of land and sheds: For small or tiny units at 50 per cent of the cost, up to a maximum of US$ 163,043. For medium to large units at 25 per cent of the cost, up to a maximum of US$ 326,087. Incentive grant of up to 50 per cent for expenditure on plant and machinery for captive power generation units. Electricity duty exemption for five years for captive generation of power for new units. Exemption from luxury tax, electricity duty, conversion charge and market fee for seven years. 38

39 STATE POLICIES AND INCENTIVES Sector specific policies (3/6) Food Processing Policy Objectives: To address the infrastructure, technology, skills and marketing constraints being faced by rice, maize, pulses, honey, makhana, fruits and vegetables, and other food processing units in the state by facilitating the setting up of new food processing units. To aid the expansion and up-gradation of existing units. Key incentives: Grant of US$ 3.25 million or up to 20 per cent of the total project cost, whichever is less, for setting up food parks. Grant up to 40 per cent of the project cost, subject to a maximum of US$ 2.17 million, for a special purpose vehicle (SPV) for a common cluster infrastructure and up to 35 per cent of the project cost, subject to a maximum US$ 1.08 million, for an individual investor. For expansion and capacity increase of existing units, the benefits of the scheme will only be available if the expansion project leads to capacity addition of at least 50 per cent. 39

40 STATE POLICIES AND INCENTIVES Sector specific policies (4/6) Sugar Incentive Package Objectives: The package aims at reviving the sugar industry by building on the factor advantages of the state. Key incentives: Re-imbursement of central excise duty on sugar for five years. Exemption from purchase tax on sugarcane for five crushing-years. Exemption from stamp duty and registration fees for land transfer. Subsidy of 10 per cent on capital investment or a maximum of US$ 2.2 million, whichever is less, on machinery after completion of first year of commercial production. Incentive package for distillery and ethanol as well as co-generation of power. 40

41 STATE POLICIES AND INCENTIVES Sector specific policies (5/6) Bihar Tourism Policy Objectives: The policy aims at promotion and development of tourism in Bihar and to transform tourism industry as a vital part of vibrant economic activities of the state. Key initiatives: The State Government will prepare an area-based master plan for developing infrastructure that are necessary for the tourist destinations. The department of tourism will formulate a 20-year master plan with future projection for development of tourism in the state. All facilities and incentives available for industry will apply to investment in tourism sector. The state will promote private investment for setting up hotels and heritage hotels. The State Government will explore and develop possibilities of launching a paying-guest scheme. Rules and regulations for land allotment will be simplified to create tourism infrastructure. The Department of tourism would identify potential tourist destination where religious fairs and festivals are an integral part of culture and would promote such destinations. Tourist information centres will be equipped with the modern information and communication technology devices. The State Government will promote weekend tourism, wildlife tourism, aqua tourism and rural tourism. Human resources required for growth of tourism will be developed. 41

42 STATE POLICIES AND INCENTIVES Sector specific policies (6/6) Policy guidelines for private sector participation for developing non-conventional energy sources Objectives: To encourage private sector participation in decentralised generation of grid-grade power, through the use of the available inputs for renewable and non-conventional energy sources such as solar, wind, water, biomass and other wastes. Key initiatives: Any industry, institution, private agency, partnership firm, consortium, panchayat, cooperative society or registered society interested in installing and generating electricity from non-conventional energy sources such as mini- and micro-hydro plants, solar-thermal plants, solar-photovoltaic system, bio-mass plants, bagasse-based plants, wind plants, cogeneration plants, municipal and industrial waste plants will be eligible for availing of incentives under the scheme. The Bihar State Hydro-electric Power Corporation (BHPC) and/or Bihar Renewable Energy Development Agency (BREDA) will provide necessary information and assistance regarding identification and selection of feasible sites. The project will be treated like any other industry and incentives/concessions applicable to new industrial units will be available according to the industrial policy. There will be no restriction on power generation capacity or supply of electricity to the grid. 42

43 BIHAR April 2010 Contents Advantage Bihar State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Bihar Company logos cited in this section are registered trademarks of the respective companies. 43

44 BUSINESS OPPORTUNITIES Food processing and dairy Bihar is one of the largest producers of vegetables and fruits in the country. The factor advantages of the state make it a suitable place for setting up units in the food processing sector. COMPFED Key players Usher Agro Limited The state is one of the leading producers of banana, mango, litchi and vegetables such as onions, tomato, potato, eggplant and makhanas in the country. Food processing is a priority sector for the State Government; up to 40 per cent of the project cost for setting up food processing units is subsidised by the State Government. Besides food processing, the State Government promotes cooperative marketing of milk and dairy products. 44

45 BUSINESS OPPORTUNITIES Food processing and dairy company profiles COMPFED Bihar State Cooperative Milk Producer s Federation COMPFED is an organised milk processing cooperative, which collects milk through district level cooperative unions, processes and markets the same. It also supports members with interventions across technology, supply chain, marketing, training, etc. In 2007, COMPFED covered four districts directly and 22 districts through five district level cooperative unions. COMPFED procures around one million litres of milk per day. Usher Agro Limited Usher Agro Limited is one of the large basic food grain (rice and wheat) processing companies in India. The company established its rice processing mill in Buxar, Bihar in The products of the company are sold under the brand name Rasoi Raja. 45

46 BUSINESS OPPORTUNITIES Chemical, oil and gas The major drivers of chemical, oil and gas industry in Bihar are proximity to sea ports Kolkata and Haldia, availability of labour, and the vast market of eastern India. Petroleum remains a large contributor to the state s GSDP as it has one of the largest public sector refineries in the country, that of Indian Oil Corporation Limited (IOCL). Key players Krishi Rasayan Exports Private Limited Graphite India Limited Indian Oil Corporation 46

47 BUSINESS OPPORTUNITIES Chemical, oil and gas company profiles Krishi Rasayan Exports Private Limited (KREPL) Graphite India Limited (GIL) KREPL is one of the major agri-chemical manufacturer, with five composite technical manufacturing units. In 2008, the total revenue of the company was US$ 63 million. In 1973, the company set up its plant at Muzaffarpur in Bihar for producing dusting powder formulation. The company operates a poultry feed unit in Muzaffarpur with capacity of form. 150 tonnes per day in pellet GIL was incorporated in The company has nine plants located across India and producing graphite products, coke and power. The coke division of the company at Barauni in Bihar is engaged in manufacture of calcined petroleum coke (CPC) and has installed capacity of 30,000 tonnes per annum. Indian Oil Corporation Limited (IOCL) In , the company produced 28,350 tonnes of calcined petroleum coke. IOCL is India s leading petroleum refinery and a Fortune 500 company. It has a refinery at Barauni, with an annual capacity of six million metric tonnes. Secondary processing facilities, such as a resid-fluidised catalytic cracker, diesel hydro-treating and a sulfur-recovery unit, have been added to the main refinery. The 498-km long Haldia-Barauni crude oil pipeline (HBCPL) receives crude oil at the Haldia oil jetty and transports it to the Barauni refinery. 47

48 BUSINESS OPPORTUNITIES Sugar Sugar plays a prominent role in Bihar s economy; the north of the state is climatically well-suited for producing good quality sugarcane with minimum inputs as compared to other states. In , about 117,000 hectares were under sugarcane production and the state produced about 5.96 million tonnes of sugarcane. Key players K. K. Birla Group Riga Sugar Company Limited Vishnu Sugar Mills Limited Eastern Sugar & Industries Limited It is estimated that about 500,000 farmers are engaged in sugarcane cultivation and another 50,000 skilled and unskilled labours are working in sugar mills. The State Government offers incentive package to the sugar industry. The Sugarcane Institute in Pusa and Rajendra Agricultural University are engaged in sugarcane-related research activities. 48

49 BUSINESS OPPORTUNITIES Sugar company profiles K. K. Birla Group The K K Birla Group s sugar company, Upper Ganges Sugar (UGSIL), has two units in Bihar Bharat Sugar Mills at Sidhwalia, with a crushing capacity of 5,000 tonnes per day (tpd) and Hasanpur Sugar Mills at Hasanpur, with a crushing capacity of 3,000 tonnes per day. Riga Sugar Company Limited Vishnu Sugar Mills Limited Eastern Sugar & Industries Limited The Sidhwalia unit also has a 18 MW cogeneration power plant. The company belongs to the P. L. Dhanuka group and was incorporated in It manufactures ethyle alcohol, molasses and sugar at Sitamarhi in Bihar. The plant has crushing capacity of 5,000 tonnes per day. The company is promoted by the Bajoria family and was incorporated in It manufactures molasses and sugar at Gopalganj in Bihar. The plant has crushing capacity of 3,500 tonnes per day. The company was incorporated in It manufactures molasses and sugar at Purba Champaran in Bihar. The plant has crushing capacity of 2,500 tonnes per day. 49

50 BUSINESS OPPORTUNITIES Manufacturing industry Consequent to the bifurcation of Bihar, the state lost most of its large units (mostly mining and engineering units) to Jharkhand. Currently, the state has leather, textile and handloom industries as its prominent sectors, apart from some engineering units. Key players Bata Industries Bharat Wagon and Engineering Company Gangotri Iron & Steel Company The state has ample raw materials (hides and skin of livestock), technical skills (leather technology institutes) and manpower, which are the major drivers for leather industry in the state. 50

51 BUSINESS OPPORTUNITIES Manufacturing industry company profiles Bata Industries Promoted by the Toronto-based Bata Shoes, Bata is among India s largest manufacturer and marketer of footwear products. The company has a tannery at Mokamehghat in Bihar and a leather footwear factory at Bataganj in Patna. Bharat Wagon and Engineering Company The Bharat Wagon and Engineering Company is a part of Bharat Bhari Udyog Nigam, a Government of India undertaking. It has a over 50 years of experience in heavy-steel fabrication. It has two units at Mokama and Muzaffarpur, which are ISO 9001 certified for manufacturing wagons; a third unit at Muzaffarpur manufactures gas cylinders. All three plants have captive-power generation capacity. Gangotri Iron & Steel Company The company produces mild steel (MS) bars and billets. In 2009, the company produced 19,665 tonnes of MS bar and tonnes of MS billet. In January 2009, the company set up a new unit in Bihta, in Bihar and the company has production capacity of 145,000 tonnes of MS bar, 108,900 tonnes of MS billet and 540,000 cubic metre of oxygen. 51

52 BUSINESS OPPORTUNITIES Tourism (1/2) The state has a rich cultural heritage as it is associated with pilgrimages related to religious gurus such as the Buddha, Mahavir, Guru Gobind Singh, and other historical monuments. Tourism in the state revolves around the Buddhist circuit (Bodhgaya, Rajgir, Nalanda), the Jain circuit (Bisram, Mandar hill, Champanagar) and the Sufi circuit. Monuments of historical and religious significance present tremendous potential for attracting both domestic and foreign tourists. The state s tourism policy stresses on developing infrastructure and financing for tourism. Source: Maps of India The Bihar Government is preparing a 20-year master plan for promotion and development of tourism in the state. 52

53 BUSINESS OPPORTUNITIES Tourism (2/2) In an effort to promote tourism in the state, the Department of Tourism, Government of Bihar, along with the Ministry of Tourism, Government of India, organised an international buddhist conclave in Nalanda and Rajgir. The state is also developing the Buddhist tourist circuit (Bodh-Gaya-Rajgir-Nalanda) with an assistance of US$ 4.6 million from the Central Government. In 2007, the total number of tourist arrival was around 10.5 million. Arrivals have been growing at around 9.7 per cent over previous two years. Arrival of domestic tourist in Bihar Arrival of foreign tourist in Bihar (No) 12, , , , , , , , in '000 6, , ,000 80,000 60, , ,000 20, Source: Ministry of Tourism, Government of India 53

54 BUSINESS OPPORTUNITIES Major industrial projects being implemented Project Sector Promoter Kahalgaon-II transmission line Kahalgaon-North Karanpura-Barh composite transmission line Power distribution Power distribution Power Grid Corporation of India Limited (PGCIL) Investment (US$ million) 3,867.8 PGCIL 2,000.0 Location Kahalgaon - Biharsharif Kahalgaon-North Karanpura Barh power project Power NTPC Limited 1,889.7 Barh Nabinagar power project Power Bharatiya Rail Bijlee Co Limited 1,087.0 Nabinagar Basic telecom sevices project Telecom services Tata Teleservices Limited 1,087.0 Partially in Bihar Patna Ganga railway bridge project Railways East Central Railway Sonepur Sub-transmission and distribution project Sugar (Paschimi Champaran) project Power distribution Bihar State Electricity Board Bihar Sugar Globe Sugar Refinery Limited Champaran Araria-Galgalia railway line project Railways North Eastern Railway Galgalia Sugar (Betiah) project Sugar Moria Sugar Private Limited Betiah Source: projectstoday.com 54

55 BUSINESS OPPORTUNITIES Key industrial projects being planned Project Sector Promoter Investment (US$ million) Pirpainti thermal power project Power Nalanda Power Company 2,173.9 Pirpainti Nabinagar thermal power project Power Bihar State Electricity Board 1,956.5 Nabinagar Coal-based power (Buxar) project Hathiadah and Durgawati pumped storage (hydel) power project Diesel locomotive (Marhowra) project Thermal power (Barauni) project Electric locomotive factory (Madhepura) project Khagaria- Bakhtiarpur NH-31 road project Integrated steel (Begusarai) project High sulphur crude maximisation project Hospital-cum-medical college (Bihta) project Water supply scheme (Patna) Power Power Manufacturing Power Krishak Bharati Co-Op. Limited Bihar State Hydro-Electric Power Corporation Limited Ministry of Railways, Government of India Vikash Metal & Power Limited 1,304.4 Buxar Bhabhua Location Marhowra Barauni Manufacturing Central Government Madhepura Roadways Finished steel Refinery Hospitals Water and sewerage pipeline National Highways Authority of India Vikash Metal & Power Limited Indian Oil Corporation Limited Employees' State Insurance Corporation Bakhtiarpur Begusarai Barauni Bihta Government of Bihar 95.9 Patna Source: projectstoday.com 55

56 BIHAR April 2010 Contents Advantage Bihar State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Bihar 56

57 DOING BUSINESS IN BIHAR Key approvals required (1/2) Approvals and clearances required Departments to be consulted Estimated time in days Incorporation of company Registrar of companies NA Registration, Industrial Entrepreneurs Memorandum (IEM), industrial licenses Allotment of land Permission for land use Registration under Factories Act and Boilers Act Site environmental approval, No objection certificate and consent under Water and Pollution Control Acts Approval of construction activity and building plan Nodal agency (Industries Department) Bihar Industrial Area Development Authority Revenue and Land Reforms Department, Government of Bihar Offices of Inspector of Factories, Inspector of Boilers Bihar State Pollution Control Board and Ministry Of Environment And Forests, Government of Bihar Urban Development and Housing Department, Government of Bihar NA Seven to 21 days (up to 90 days for acquisition of nonindustrial land) 30 days (45 days for conversion of non-industrial land for use) Up to 120 days 60 days Seven days NA: not available 57

58 DOING BUSINESS IN BIHAR Key approvals required (2/2) Approvals and clearances required Departments to be consulted Estimated time in days Sanction of power Bihar State Electricity Board Up to 30 days Sanction of water Fire service clearance Registration under state s sales tax act, and central and excise acts Water Resources Department, Government of Bihar State Fire Service Headquarters, Government of Bihar Sales tax department, central and state excise departments Up to 30 days Up to 15 days Seven days 58

59 DOING BUSINESS IN BIHAR Cost of doing business in Bihar Cost parameter Cost estimate Source Industrial land (per acre) US$ 384,780 in Patliputra, US$ 83,700 in Muzaffarpur Bihar Industrial Area Development Authority Labour (per man year) US$ 825 to US$ 1,275 Office space rent (per sq ft per month) Residential rent (2,000 sq foot per month) US 20 cents to US 35 cents US$ 145 to US$ 280 Labour Resources Department, Government of Bihar Property dealers Property dealers Five-star hotel room (per night) US$ 100 to US$ 180 Leading hotels in the state Commercial and industrial electricity (per kwh) Industrial: US 8.8 cents to US 9.2 cents Commercial: US 9.1 cents to US 10.5 cents Bihar State Electricity Board 59

60 DOING BUSINESS IN BIHAR Single-window approval mechanism Bihar Single Window Clearance Act, 2006, and the Bihar Industrial Policy, 2006, promote industrial growth by giving rapid clearances, issuing of licenses and certificates and providing an overall investorfriendly environment in the state. The Industries Department of the state and the District Investment Centre (DIC) act as nodal agencies for investments. Proposals for investment greater than US$ 21.7 million are routed through Chief Minister and the Cabinet for approval. Investment handled Body Chairman Nodal agency US$ 2.17 million to US$ 21.7 million State-level investment promotion board Industries Development Commissioner Industries Development (Udyog Mitra) state level Below US$ 2.17 million District-level committee District Collector DIC district level 60

61 DOING BUSINESS IN BIHAR Key investment promotion offices (1/2) Industry Department, Government of Bihar District Industry Centre (DIC) Bihar Industrial Area Development Authority (BIADA) State-level nodal body under the single-window regime for investments of above US$ 2.17 million. Primary functions involve coordinating applications from investors, and processing and facilitating the process of getting clearances from various departments. Industry Department, headed by the Principal Secretary, supervises district industry centres (DIC), industrial area development authorities and industrial premises in the state. District-level nodal agency for investments below US$ 2.17 million. DIC supports entrepreneurs in identifying local resources, supply of raw materials and equipment, arrangement of credit facilities, marketing, quality control, etc. BIADA develops infrastructure for industries in segments such as roads, drainage, water, power, etc. Supports entrepreneurs in setting up industries and in availing incentives offered by the State Government. 61

62 DOING BUSINESS IN BIHAR Key investment promotion offices (2/2) Bihar State Finance Corporation Bihar State Electricity Board (BSEB) Bihar State Pollution Control Board The main state-level institution that provides term lending facilities to industrial entrepreneurs. The corporation has been revived to supplement the role of banks in lending to industries. The board is responsible for the synchronised development of generation, transmission and distribution of power in the state. The purpose of the organisation is prevention and control of pollution through inspection of treatment plants, standards application, research and development activities, etc. Headquartered at Patna, the organisation has seven zonal-offices. 62

63 DOING BUSINESS IN BIHAR Contact list (1/2) Key agency Industries Department, Government of Bihar Bihar State Finance Corporation Contact Information Vikas Bhawan Bailey Road, Patna , Bihar. Phone: Fax: Website: Bihar State Finance Corporation Fraser Road, Patna , Bihar Phone: Fax: bsfcpatna@gmail.com Website: 63

64 DOING BUSINESS IN BIHAR Contact list (2/2) Key agency Bihar State Electricity Board (BSEB) Bihar Industrial Area Development Authority (BIADA) Bihar State Pollution Control Board Contact Information Bihar State Electricity Board (BSEB) Vidyut Bhawan, Bailey Road, Patna , Bihar. Phone: Website: Bihar Industrial Area Development Authority Udyog Bhawan, First floor, East Gandhi Maidan, Patna , Bihar Phone: Fax: md@biada.in, info@biada.in, Website: Bihar State Pollution Control Board Beltron Bhawan, Shastri Nagar Jawahar Lal Nehru Marg, Patna , Bihar Phone: Fax: bspsb@vsnl.net, Website: 64

65 DOING BUSINESS IN BIHAR Annexure (1/3) Socio-economic classification (SEC) of urban and rural households urban grid Education/Occupation Illiterate School up to four years/ literate, but no formal schooling School up to five to nine years SSC/HSC Certificate course, but not graduate Graduate/post graduate general Graduate/post graduate professional Unskilled workers E2 E2 E1 D D D D Skilled workers E2 E1 D C C B2 B2 Petty traders E2 D D C C B2 B2 Shop owners D D C B2 B1 A2 A2 Entrepreneurs: employee none D C B2 B1 A2 A2 A1 Entrepreneurs: employee < 10 C B2 B2 B1 A2 A1 A1 Entrepreneurs: employee > 10 B1 B1 A2 A2 A1 A1 A1 Self-employed professionals D D D B2 B1 A2 A1 Clerical/salesman D D D C B2 B1 B1 Supervisory level D D C C B2 B1 A2 Officers/executives: junior C C C B2 B1 A2 A2 Officer/executive: middle/senior B1 B1 B1 B1 A2 A1 A1 Source: Market Research Society of India 65

66 DOING BUSINESS IN BIHAR Annexure (2/3) Socio-economic classification (SEC) of urban and rural households rural grid Education Pucca Type of house Semipucca Kuccha Illiterate R4 R4 R4 Literate but no formal school R3 R4 R4 Up to fourth standard R3 R3 R4 Fifth to ninth standard R3 R3 R4 SSC/HSC R2 R3 R3 Some college but not graduate Graduate/post-graduate (general) Graduate/post-graduate (professional) R1 R2 R3 R1 R2 R3 R1 R2 R3 Source: Market Research Society of India 66

67 DOING BUSINESS IN BIHAR Annexure (3/3) Exchange rate Year INR equivalent of one US$ Average for the years 67

68 BIHAR April 2010 DISCLAIMER India Brand Equity Foundation ( IBEF ) engaged ICRA Management Consulting Services Limited (IMaCS) to prepare this presentation and the same has been prepared by IMaCS in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of IMaCS s and IBEF s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. IMaCS and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither IMaCS nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation. 68