Industries on rise in Bihar on back of Government’s policy-triad

Industries on rise in Bihar on back of Government’s policy-triad

Bihar today is on the cusp of profound economic and social changes. Its economy, much like the national economy of India, has been continuously growing (at about 10%). It has a large youth bulge which is going to offer demographic dividends over many decades to come. However, reaping the benefits of such demographic dividends will require skilling the youth, promoting fast-track industrialization particularly in manufacturing sector to absorb them into formal employment.  

 

Under the present chief minister, Mr. Nitish Kumar, Bihar’s economy has been constantly rising. The economic survey of Bihar (2018-19) states the growth rate of Bihar’s economy in 2017-18 to be 11.3 percent up from 9.9 percent previous fiscal. This impressive feat is been said to be the result mainly of high levels of Government expenditure. The survey also emphasizes on the need for higher growth in the “Industrial” sector and highlighted that it had only “moderate impact” on overall economic growth. 

"Bihar's industry is growing, Bihar's economy is growing. In the past few years the industry has grown manifold. My message to all the potential investors is to come and witness our development story. I welcome you all to be part of our development and grow with the growth of Bihar."

- Nitish Kumar, Chief Minister, Government of Bihar

 

With the aim to promote large inbound investments into the State, “Invest Bihar” initiative has been conceived and made operational which is helmed by Bihar’s Investment Commissioner. Further, in order to bridge the “physical divide” between potential investors and Bihar Government, Invest Bihar has a permanent office in Mumbai with dedicated consultancy support from Grant Thornton for Investment promotion, facilitation and aftercare.

 

Simultaneously, an ambitious legislative framework has been put in place. The “policy-triad”, as this author calls it, has the potential to trigger next wave of industrialization and promoter new-age entrepreneurship in the State. The three policies which together comprise the “policy-triad” are:

  1. Bihar Industrial Investment Promotion Policy, 2016 (1-Sep-16); 
  2. Bihar Start-Up Policy, 2017 (17-Mar-17), and 
  3. Chief Minister Scheduled Castes and Scheduled Tribes Entrepreneurs’ Scheme, 2018 (17-May-18).

 

Incentivising industrialization in a big way: BIIPP 2016

 

The Bihar Industrial Investment Promotion Policy, 2016 (“BIIPP 2016”), is a significant step forward vis-a-vis its predecessor, Industrial Incentive Policy, 2011. Effective 1-Sep-16, the BIIPP 2016, like its predecessor, runs for a period of 5 years. While new industries (also, expansion/modernization/diversification of existing units) in any sector is eligible for incentives under the policy, industries falling under identified ten (10 Nos.) “priority” sectors, and four (4 Nos.) “High-priority” sectors are entitled for added incentives. Further, in line with Government’s mission of “Inclusive Growth”, entrepreneurs from special category, such as women, scheduled castes, scheduled tribes, third-gender, acid attack victims, etc are offered 15% additional money across all incentives category. 

 

Under the enabling legislations namely the Bihar Industrial Investment Promotion Act, 2016, and the Bihar Industrial Investment Promotion Rules, 2016, a high-profile State Investment Promotion Board to recommend on eligibility of proposals for incentives under BIIPP 2016, and a State Investment Promotion Board Secretariat to aid and support the Board have been constituted. 

 

 

- Pictorial presentation of governance of Clearances and Incentives under Bihar Industrial Investment Promotion Policy, 2016

 

The provisions of enabling legislation such as mandatory online integrated clearance system, admissibility of self-certified documents, deemed approval by Secretariat in case of unreasonable delay in grant of clearances by any State Department, fixed monthly meeting of the Board, and time bound approval of incentive applications signal Government’s commitment to have a investor-friendly regime in place. 

 

The total incentives under the policy may be availed up to the tune of 203% of the eligible project cost, i.e. investment, subject to conditions. Key incentives offered under the BIIPP 2016 are in the nature of Interest Subvention, SGST reimbursement, Stamp-duty and Registration fees exemption/reimbursement, Electricity Duty reimbursement, Land conversion fees exemption/reimbursement, etc.   

 

Joining the Start-Up band wagon: BSP 2017

 

Bihar was one of the first States to institute in place a sector-agnostic Start-Up Policy to help cement a strong Start-Up eco-system in Bihar, and to incentivise innovative youth setting up Start-Ups. Bihar Start-Up Policy, 2017 envisages setting up a corpus fund of INR 500 crores to support Start-Ups through seed capital financing, incubation support, infrastructural support, IPR facilitation, et al. 

 

Although the recent changes (revenue threshold from 25 cr to 100 cr, and years of existence from 7 to 10) moderating the eligibility conditions under the Start-Up India policy are yet not incorporated in the Bihar policy, every attempt has been made to mirror Start-Up India policy in so far as benefits to certified Start-Ups are concerned.

 

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- Chief Minister, Mr. Nitish Kumar launching Bihar Start-Up Policy, 2017

 

With an aim to unlock the innovation potential of Bihar, enhance the depth and breadth of Start-Up ecosystem in Bihar, contribute to the creation of thousands of jobs, counteract the process of brain drain, and to rejuvenate the next wave of economic growth in the State, Government of Bihar launched the policy with a declared vision, i.e. "To enable Bihar emerge as the most preferred destination for Start-Ups and entrepreneurs by leveraging the potential of local youth through a conducive Start-Up ecosystem for inclusive growth in the State"

 

Under the policy, Department of Industries (implementing Department) has empanelled 15 Incubators, each specific in a domain, through which it offers incubation to eligible applicants under the policy. A high-profile independent Start-Up Investment Advisory Committee (SIAC), with members such as Dr. Saurabh Srivastava of India Angel Network, HCL’s co-founder and Padma awardee Ajai Choudhary, chair of IIM Calcutta Innovation Park Srikant Shastri, to recommend applicants for certification under the policy, has been constituted (recently constituted on 5-Dec-19). Bihar’s Investment Commissioner, senior IRS officer, Shri R. S. Srivastav works as the convener of the SIAC. 

 

As per the latest data on the official website, www.startup.bihar.gov.in, the total applications received by the Department for registration under Policy is >11200 Nos. out of which 1381 Nos. have been identified and cleared for incubation. As of this date, 70 nos. applicants already, after Start-Up certification, have been given benefits under the policy.

 

Inclusive Entrepreneurship: CMSCST Scheme 2017

 

Chief Minister Mr. Kumar has, since assuming power in 2005, laid special emphasis on what the clarion call of his Government is: “Inclusive Growth”. Taking the mission forward, after Bihar Start-Up Policy, 2017 had been promulgated, an ambitious policy to include the members of disadvantaged scheduled castes and scheduled tribes communities into the entrepreneurship was rolled out. 

 

Chief Minister Scheduled Castes and Scheduled Tribes Enterpreneurs’ Scheme, launched in 2017, is unique in that it offers easy capital of INR 10 lacs in form of interest free loans to budding entrepreneurs from the SC/ST community. While half of such loan is offered as grant, the rest half is to be returned in equal instalments spanning over 84 months, i.e. 7 years. Under the scheme, selected SC/ST youth are offered 2 weeks entrepreneurship training at accredited state institutions of excellence before disbursing the first instalment of the sanctioned project cost. 

 

In general, the members of the SC/ST communities had been facing immense difficulties in getting a loan from even nationalised banks. Under this scheme, loans are being granted on mere self-declaration of the beneficiaries and the first physical interface with the applicant is to made only after the applicant has been selected for entrepreneurship training.

 

Expectedly, the Scheme is very popular with the SC/ST youth, and as per the latest data available on the Industries portal (www.udyog.bihar.gov.in), more than 40000 applications have been received by the Department of which 7000 Nos. have been processed, and approx 3600 beneficiaries have been given benefit under the Scheme.

 

[The author, CA. Kunal Kishore, is a fellow member (2012) of the Institute of Chartered Accountants of India. Closely working with the leadership at Department of Industries, Government of Bihar, he heads the PMA for State Investment Promotion Board Secretariat. The author may be reached at email (kunal.kishore@icai.org), linkedin (www.linkedin.com/in/kunalkishore), or his website (www.kunalkishore.in)]