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twitter-logoAnand Adhikari | Print Edition: June 12, 2011

Balram Singh Yadav, 46, the Mumbai-based Managing Director of Godrej Agrovet, has toured Bihar on business six times in the last seven years. Each time he visits, he finds the overall atmosphere has improved over the last time.

On his early visits, the road from Patna airport to his hotel used to be potholed and dusty. He never dared venture out of his hotel in the evenings for fear of being mugged.

That is all history now. "A fruit seller can stay on the street till as late as 10 p.m. if he wants to," he says, describing the new Bihar. "Rickshaws freely ply late into the night." Not surprisingly he is keen his company take advantage of the transformation. Godrej Agrovet is setting up a Rs 70-crore cattle and poultry feed mill at Hajipur, across the Ganga river from Patna.

"Bihar will emerge as the next growth engine for eastern India," he says. Hajipur, too, is the destination of biscuit major Britannia, which is setting up a 50,000-tonne bakery there. "Bihar represents a large and growing market opportunity and therefore we decided to create a manufacturing unit closer to the market," says a company spokesman, declining to give any more details.

Ruchi Soya, the Mumbai based $2.6 billion (Rs 11,700 crore) FMCG group, best known for its edible oils, is pumping Rs 200 crore into setting up agro-processing centres at Kaimur, 170 km northwest of Patna, near the Uttar Pradesh border. West Coast Paper, promoted by Shree Digvijay Cement Company and later taken over by SK Bangur Group, has plans for a board unit at Rohtas, 140 km southeast of Patna, while infrastructure giant Jaypee Associates is working towards a fly ash-based cement factory at Motipur, part of Muzaffarpur district.

Bihar, home to 104 million people, according to provisional estimates in the 2011 census and ranked third by population behind Uttar Pradesh and Maharashtra, was always a draw for industry, but until the Nitish Kumar-led government took charge in November 2005, the abysmal law and order situation and poor infrastructure kept investors away. But now, with both policing and connectivity having improved dramatically, industry sees no reason to be diffident.

"Over 40 per cent of the country's population resides in the east and the north-eastern region," points out Dinesh Shahra, Managing Director of the Ruchi Soya Group. "Bihar provides a huge opportunity for upgrading consumers from loose and poor quality oil to packaged refined edible oil."

And consumption is rising rapidly. The state's gross domestic product has been rising by more than 10 per cent annually for the last five years, compared to an average of 3.5 per cent per year between 2000 and 2004, when the Rabri Devi-led Rashtriya Janata Dal government was in power.

Manufacturing and services have both shown substantial increases: the contribution of manufacturing to the state's income has increased from 10.5 per cent in 1999/2000 to 16.61 per cent a decade later, while that of services has gone up from 50.50 per cent to 61.65 per cent in the same period. Agriculture's share may have consequently declined; even so agricultural growth in 2009/10 was 8.85 per cent.

Balram Singh Yadav, Managing Director, Godrej Agrovet
Bihar will emerge as the next growth engine for eastern India: Balram Singh Yadav
In a reflection of the frenzied construction activity in the state, Bihar is now the fastest growing cement market in the country - 28 per cent growth in the past year against a national average of nine per cent. With better roads and little fear of attracting the attention of car thieves or kidnappers, people are buying cars: leading auto maker Maruti Suzuki reported a 30 per cent rise in sales in Bihar between April and December 2010.

Government figures show that the number of vehicles in the state has grown four times, from around 80,000 in 2005/06 to 3.19 lakh in 2009/10. Many more people are visiting the state, as revealed by the amount of aircraft movement: in 2004/05, a total of 3,814 aircraft landed or took off from the state's airports; five years later the figure was 10,726.

Telephone connections - landlines and mobiles taken together - have risen 10-fold in five years, from 4.2 million in 2005/06 to 41.5 million until March this year. With growing incomes, people are buying more: FMCG major Samsung's sales grew by 25 to 30 per cent between April and December last year.

No doubt problems remain, land availability being primary among them. Godrej Agrovet needs just 10 acres to set up its 84,000-tonne facility, but it has not got it yet. "I'm yet to hear any positive news," says Yadav. "Industry needs faster acquisition of land for developing new, modern industrial parks," says an industrialist who is scouting for a suitable site in the state. "They should provide land where industry wants to go. The industrial agenda should precede the political agenda."

Unable to secure land, the state cabinet in January approved new rules relating to the conversion of agricultural land into non-agricultural, which effectively absolves the government of responsibility in getting land for industry. These rules leave buyers free to purchase agricultural and other land directly from farmers at market rates and use it for industrial purposes, after paying a conversion fee. But the decision is unlikely to set industry rejoicing, since it is looking for land not just anywhere, but in places where the infrastructure it needs is already available or can be easily set up. In particular, it is eyeing the old industrial estates around some towns in Tirhut division such as Hajipur and Muzaffarpur as well as Bhagalpur and Gaya, where it is still the government that controls the limited land available. "The government has to take the initiative," says Yadav. Other major stumbling blocks are the lack of reliable power supply, the frequent occurrence of floods and droughts and the absence of skilled manpower.

Bihar is a power deficient state with a total generating capacity of less than 600 MW against a peak demand of 3,000 MW. "We haven't seen big projects rolling out," says a CEO unwilling to be named.

But the state machinery says power projects have a long gestation period. In April, the state cabinet gave its nod to a 1,320 MW coalbased power plant to be built at a cost of Rs 7,280 crore by the Kolkata-based India Power Corporation. "There are many more projects in the pipeline," assures Sushil Kumar Modi, Bihar's Deputy Chief Minister.

Gautam Adani, Chairman of the $5.6 billion (Rs 25,000 crore) Adani Group, is also looking out for opportunities in the power sector. "We could look at power, mining and agro-based industries in Bihar," says Adani.

Currently, the majority of industrial projects headed for Bihar are agro-based. But the state has the geographical advantage of two mineral rich neighbours, Jharkhand and Orissa, which makes it an ideal location for power, cement and other non-agro industries as well.

Overall, industrialists remain hopeful, being particularly impressed by the attitude of the bureaucracy. "We found bureaucrats very accommodating, cooperative and determined to bring development to the state," says Shahra of Ruchi Soya.

If Bihar can overcome the land and power bottlenecks, the entry of Indian business houses will only accelerate in future.

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