The Industrial policy 2016 experience remains the last industrial policy adopted by the government of Bihar. But over the years the Bihar government has done required amendments on the basis of experience and requirements. The latest amendment would remain effective from 01.09.2016 till 31.03.2025. Here are the main features of the Industrial policy of Bihar.
Bihar state cabinet approved (June 27, 2020) the Bihar Industrial Investment Promotion Policy 2020, an amended version of industrial policy 2016 in 2020. The, deputy CM and Minister of Finance said that the amended industrial policy has focused on local resources for industrialization as state does not have much raw materials required for industries. He said that the focus of industrial policy 2020 was on agro-based products, electronics, machineries and handloom etc. For the first time wood-based industries were included in the priority sector.
Main Features
- Achieve annual industrial development growth rate of 15%
- Increase share of manufacturing sector to GSDP to 25% as envisaged in National Manufacturing Policy.
- Attract on-ground investment of Rs. 15000 crore.
- Create high-end infrastructure to attract investment in the state.
- Eradicate regional industrial imbalance by uniformly extending the benefits of investment to all geographical areas of state.
- Provide relatively more economic benefits to the priority sections of society such as SC, ST, Women, differently-abled, war widows, thirs gender, acid attack victims etc.
- Ensure that industries facilitate skill development of local people so as to achieve the target of 15 million skilled youths as per the “seven commitments” of the state government.
- Increase the competitiveness of MSMEs and adoption of “zero Defect Zero Effect” manufacturing practice.
If the manufacturing activity does not contribute in value addition, it shall not be considered under this policy Units involved only in trading activities will not come under the purview of this policy. The industrial policy of Bihar applies only to private sector investors including foreign investors, but not on public sector investment from central government or state government. Incentives under this policy shall be available only for the investments made in the state
Priority Sector
The 2016 Industrial policy categorized 12 industries as priority sector including: 1. Food Processing, 2. Tourism, 3. Small Machine Manufacturing, 4. IT, ITeS, Electrical and Electronic Hardware Manufacturing Sector, 5. Textile, 6. Plastic & Rubber, 7. Renewable Energy, 8. HealthCare Sector, 9. Leather 10. Technical Education Sector, 11, Wood based industries, and 12. General Manufacturing Industries Sector. In all these categories there are sub categories under the priority sector designation. The list of sub categories under the above headings was expanded with effect from June 29, 2020.
High Priority Sector
The definition of high priority sector was also put forth by the Industrial Policy statement for different sectors. The definition effective since December 27, 2017, for example, for the IT & ITeS and Electronic System and Design Manufacturing (ESDM) Sector defines high priority sector unit as a unit in which (i) Investment in Fixed Asset and Plant and Machinery (excluding Land) is more than Rs 5 Crore, and (ii) Creating direct employment of at least 50 core workers (Excluding support staff such as Drivers, Guards etc.). Similarly for the Textile, Apparel and Leather Sector, the definition of high priority sector included a unit in which (i) Investment in Fixed Asset and Plant and Machinery (excluding Land) is more than Rs 5 Crore, and (ii) Creating direct employment of at least 50 core workers (Excluding support staff such as Drivers, Guards etc.).For the Food Processing Sector also a unit was defined as high priority in which investment in Fixed Asset and Plant and Machinery (excluding Land)is more than Rs 5 Crore.
Incentives offered by the Industrial Policy
The industrial policy of Bihar offers many incentives to priority and non-priority sectors. The pre production incentives include 100% reimbursement of stamp duty/ registration paid on land and 100% reimbursement of land conversion Fee.
The Post production incentives include interest subvention on term loan from the bank/ financial Institution registered under RBI/ SEBI.
These include different schemes of interest rate subvention as follows:
- Micro & Small@12% or actual, whichever is lower Others @10% or actual whichever is lower
- Maximum of 30% of approved project cost for priority sector and 15% of approved project for non priority sector with a maximum limit is Rs. 10 Cr.
- For SC/ ST/ Women/ Differently Abled Person/ War Widow/ Acid Attack Victim/ Third Gender Micro & Small would get interest rate subvention @ 13.8 % or actual whichever is lower. Others would get @ 11.5% or actual whichever is lower.
- Overall limit will be 34.5% of approved cost for priority sector and 17.25% for non priority sector; Maximum limit is Rs. 11.5 Cr.
Tax Concessions and incentives offered by the Industrial Policy
The Industrial Policy of Bihar also offers tax incentives as follows:
- Priority Sector -100% of approved project cost
- Non Priority-70% of approved project cost
- Micro & Small Units/Solar power generation or Renewable energy generation unit for commercial purpose – additional 30% of approved project cost
- 80% GST reimbursement for five years
- 100% reimbursement on electricity duty for five years; not eligible, if captive power exported to entities other than BSPHCL.
- For SC/ST/ Women /Differently Abled Person/War Widow/Acid Attack Victim/Third Gender; 92% VAT/ CST/Entry Tax reimbursement for five years; Priority Sector : 115% of approved project cost; Non Priority : 80.5% of approved project cost.
- There is also special provision for private Industrial Parks. The industrial policy offers for them an interest subvention rate of 10% or actual which is lower, maximum up to 35% for priority sector/ 30% for non priority project or Rs. 50 Cr. whichever is lower.
Latest Developments
Investment in Bihar
Bihar’s State Industries Minister Syed Shahnawaz Hussain has revealed (March 3, 2022) that the state has received industrial investment proposals worth Rs 40,000 crore in last one year and many big industrial units will be launched here in the next two months. He also said that a new textile policy will be formulated soon by the state government to accelerate the potential of the textile sector.
New Ethanol Policy
Bihar became the first state in India to have an ethanol policy. Under the the new ethanol policy, 17 units with an investment of Rs 3423.25 crore and a capacity of 75 crore litres per annum have entered into a long-term agreement with the oil marketing companies.
Promotion of Silk
Silk is the focus product in Bihar, for textile units and the state has been famous for the production of silk.Bhagalpur district of Bihar has been a centre of silk fabric manufacturing. Tassar silk of Bhagalpur is an exclusive product of Bihar which has the potential to fetch premium prices. According to an estimate, Bihar produces around 70 tonnes of silk.
Improvement in power supply and connectivity
For attracting investment Bihar is trying to provide uninterrupted supply of power and connecting all-district centres by 4-lane roads. While Patna, Gaya, Darbhanga have airports are also being developed in other districts like Chapra and Bhagalpur. Bihar provides good opportunities for exports to adjacent countries, viz., Nepal, Bangladesh and Bhutan.
Tie- up with SIDBI for development of MSMEs
In the month of February 16, 2022, the Small Industries Development Bank of India (SIDBI) tied up with the Government of Bihar to promote the micro, small and medium enterprises (MSME) sector in the state. To this effect, two memoranda of understanding (MoU) have been signed between SIDBI and the industries department, Government of Bihar, and the Bihar Industrial Area Development Authority (BIADA) to develop the MSME ecosystem in the state. Under the first MoU with Bihar’s industry department, project management units (PMUs) will be deployed by SIDBI with the state government, SIDBI. The PMU will support the state government in making necessary interventions for focused engagement of SIDBI with Bihar, with the objective of facilitating development of the MSME ecosystem. It will support the state government in making necessary interventions for focused engagement of SIDBI to facilitate development of MSME ecosystem in the state. According to the second MoU, SIDBI will work in close coordination with BIADA to benefit MSMEs who want to set up any industrial unit on the land/ plot allotted by BIADA so as to promote industrialisation in the state.
Proposal for investment in IT sector
The state information technology (IT) department received (13 April 2022) a proposal entailing investment worth Rs. 817 crore to establish data centres across the state.
A meeting in this regard was held at the Bihar IT department headquarters in Patna Chaired by IT minister Jibesh Kumar and attended by a prospective investor and senior IT department officials.
Bihar was a backward state and primarily it remains an agrarian economy, especially after the separation of Jharkhand. The state is now trying to diversify its industrial sector. Now Bihar is covering up the development gap. Bihar’s Gross State Domestic Product (GSDP) grew at a CAGR of 13.27% between 2015-16 and 2019-20. The state has witnessed strong growth in per capita net state domestic product. At current prices, per capita NSDP of the state grew at a CAGR of 13.41% (in Rs.)
According to IBEF, Bihar is one of the strongest agricultural states. The percentage of population employed in agricultural production in Bihar is around 80%, which is much higher than the national average. It is the fourth largest producer of vegetables and the eight largest producers of fruits in India. Food processing, dairy, sugar, manufacturing, and healthcare are some of the fast-growing industries in the state. The state has planned initiatives for the development of other sectors such as education and tourism and also provides incentives for information technology and renewable energy.
The state has a large base of cost-effective industrial labour, making it an ideal destination for a wide range of industries. According to the Department for Promotion of Industry and Internal Trade (DPIIT), the cumulative FDI inflows in Bihar were valued at US$ 50.62 million between October 2019 and March 2021.
Total merchandise export from the state stood at US$ 1,661.13 million in 2020. In 2020-21 (until January 2021), exports stood at US$ 1,160.72 million.