Business Today

Battle For Bihar

BT does a reality check of the claims and counter claims in the fight between the JD(U) and the BJP for voter mind space ahead of elections.
twitter-logo Anilesh S Mahajan        Print Edition: October 11, 2015
Battle For Bihar
(Illustration: Ajay Thakuri)

The room in Rajnish Kumar's house at Bhambhai village in Bihar's Arwal district can barely fit a sofa, a double bed and a refrigerator. As you lounge on the sofa, the 35-year-old school teacher picks up a bottle from the refrigerator and pours water into a steel glass. He then enquires if we need ice too. This is routine hospitality, but for Rajnish and his family, a proud moment too. After years of struggle, their village was connected with the electric grid in July this year. Cold water and ice are luxuries they can enjoy now.

In the adjacent room, partitioned with a curtain, his seven-year-old son, Vaibhav Raj, is studying. "I feel relieved when I see him study under a light, unlike me, who had to study under a lantern," he says. Rajnish then points towards the iron-grilled window and says,"Now we can also run a desert cooler and sleep comfortably in summers. If we continue to get electricity like this, the fate of the next generation will change," he says, adding that 50 other households in his village also get electricity now.

'Electricity for all' has been Chief Minister Nitish Kumar's poll plank since his 2013 Independence Day speech. And this is what he is hoping will click with voters as he seeks a fresh mandate in Assembly elections starting October 10. In the 2005 elections, Nitish-led JD(U) and its allies, including the Bharatiya Janata Party (BJP), had won on the promise of improving the state's law and order. In the 2010 elections, he promised a road to every village. This time, the focus is on electricity. The reason is simple. Bhambhai is one of the 9,769 villages in the state that are partially electrified (another 26,373 have full access). Close to 2,000 have no access to electricity.

90% people in the state use wood, cow dung or kerosene for cooking and more than half live in houses with thatched roofs

Nitish's opponent and one-time ally, BJP, however, is out to spoil the party. In his election rallies, Nitish cites examples such as Bhambhai as his achievements. But in the BJP's rallies, Prime Minister Narendra Modi and party chief Amit Shah highlight the other side of the coin - only 1.2 crore out of Bihar's two crore households have access to electricity despite 10 years of Nitish. Modi has promised 24x7 power by 2019.

As Bihar gets set to vote in a new government in an election seen as a make-or-break for both Nitish and Modi, a war of words has broken out between the main rivals - the JD(U) and its allies and the BJP camp - as they counter every election promise being made by the other side with vigour.

Take Modi's announcement of projects worth Rs 1.65 lakh crore. These include pipeline infrastructure, new railway lines, food processing units, power plants and a railway engine unit. The BJP is also promising 24x7 electricity, a gas pipeline network, more LPG connections, higher funding from Mundra Bank for small businesses, master plans for cities, housing for all and, above all, improvement in law & order. The party reckons that in a state where around 90 per cent people use wood, cow dung or kerosene for cooking and more than half live in houses with thatched roofs, these promises are sure to resonate with the masses.

In response, Nitish has called these schemes old wine in new bottles. Instead, he has offered a wider road network, more electricity connections and reforms in the business environment. Above all, he is promising to keep fighting for a special status to Bihar.

But look at the irony. When he first came to power in 2005, his poll plank was development. Now, after nearly 10 years of rule, he is not just fighting anti-incumbency but is also on the defensive as his former ally, the BJP, hijacks his raison detre. Also, this time, he is fighting along with his enemy-turned-friend, Lalu Prasad Yadav, and the Congress. His allies are seen more as his weakness than strength. In this barrage of allegations and offers and counter offers, how do you separate the wheat from the chaff?

GROUND REALITIES

Nitish Kumar is on the defensive on most social and infrastructure parameters, except one - roads. And he is banking heavily on his image as a 'doer' on this front. In 2010, when access to roads was his poll plank, the alliance led by him swept the elections. After winning, he brought in his key man, Prataya Amrit, as road secretary. Today, every town and village in the state is connected by roads. Now, the state is looking for support from the Centre for connecting habitats with up to 250 people as well. In 2005, Bihar had 3,232 km in state highways. Today, the number is 4,400 km.

A top bureaucrat, who has worked closely with the chief minister, pointed to the state's map at his office, showing that most roads in the state connect east and west. "We are working with the centre and other states' agencies to connect the Nepal border at Raxaul to Paradip port in Odisha," he says assertively.

But many believe that the network is still not good enough. The state requires a web of another 5,000 km in state highways, ring roads and bypasses around major cities and towns. "The cost of moving goods in Bihar is 150 per cent more than in any other state, largely because of the condition of state highways," says the CEO of an FMCG company.

Meanwhile, Nitish is promising a transformation in the power situation as well. Hoping for an encore, he has appointed Amrit as his energy secretary.

In power - which is emerging as the biggest issue in these elections - Bihar's consumption is just 203 KWH per person as against the national average of 1,010 KWH. Nitish says this is because Bihar started late. In 2005, the state's per capita power consumption was only 70 units and more than two-third of the state had no access to power. The state-owned installed capacity is merely 70 MW and distribution companies buy roughly 3,000 MW from either the Centre's pool or the spot market. The state reported a 19 per cent peak deficit in the last financial year. Both distribution companies in the state are bleeding with a consolidated debt of Rs 177 crore. This means limited capacity to buy additional electricity. As a result, there is no city, town or village with 24-hour power supply. Although Bihar has signed an MoU with the power ministry for providing electricity to every household by 2018, it will not be easy.

Bihar was the last state to carry out power reforms, in 2013, a decade after others started. "Bihar needs to reform various practices in its transmission and distribution system," says Amrit. "I am not that worried about generation, as NTPC is coming up with new capacities in the state, from where Bihar will get a lion's share. Moreover, other states like Madhya Pradesh and Chhattisgarh are becoming power surplus. There is also solar capacity. We will be able to buy enough. The challenge is transmission and distribution reforms," he says.

RETURN OF THE NATIVE?

Even if Nitish can convince voters about his ability to deliver on power, as he did in roads, it's the social indicators where he has the most to answer.

In the 2010 polls, Nitish's claim of having improved Bihar's human development indices and roads paved the way for his alliance's sweeping victory. But today, the equation is substantially different.

In the past, Nitish's development model has got a pat from Nobel laureate Amartya Sen, who argues that growth is not independent of social transformation. In fact, the latter makes the workforce healthier and alleviates poverty. A report of the Rangarajan panel states that Bihar saw the steepest fall in poverty, from 63.9 per cent to 41.3 per cent, between 2009/10 and 2011/12. Around 21 million people were brought above the poverty line during the period. At the national level, poverty fell from 38.2 per cent to 29.5 per cent during the period.

But these figures do not give the complete picture. A huge chunk of population continues to depend on agriculture, which is increasingly becoming less remunerative. Widespread landlessness, pegged at nearly 70 per cent in villages, has created boroughs of poverty and underemployment. According to the 2011 census report, Bihar's population density is 1,100 people per sq km, the highest in the country, and average land holding is half an acre.

Education is still a drag. The literacy rate is 62 per cent compared to 73 per cent nationally. The literacy level of girls, a mere 52 per cent, is the lowest in the country. There has been some improvement in numbers recently. If we look at the current student numbers, they are not too far behind the national average. There are 8.18 million girls in schools compared to 8.28 million boys.

But the state lags behind on other social indicators. In the state, 34 children out of 1,000 die as infants, while 219 mothers out of 1,000 die while giving birth; these numbers are much above the national averages of 28 and 178, respectively. Close to 40 per cent of those who survive are underweight by five and almost 90 per cent are anaemic. In the labour ministry's data published in 2014, out of 1,000 people in urban Bihar, 74 are looking for jobs. In rural areas, the number is 20 (largely due to MNREGA and Centre and state-sponsored infrastructure projects). The national averages are 34 and 16, respectively. The worst state on this parameter is Kerala, where the figures are 72 for urban areas and 75 for rural areas.

For all its strengths and weaknesses, Nitish's development model is being challenged by his friends-turned-opponents, who are offering an alternative - industrialisation.

Over the years, Bihar has fared poorly on this front. Only 17 per cent of the state's gross value of output comes from industry compared to nearly 29 per cent nationally. In 2013, industry body Assocham's study found that most of Bihar's growth stimulus came from public spending while Modi-led Gujarat was going for private investment.

Bihar's economic growth over the last few years has largely been a result of public spending on roads and bridges. In one decade, the capital outlay swelled from Rs 1,205 crore in 2004/05 to Rs 21,151 crore in 2014/15. During the same period, Madhya Pradesh's capital outlay rose from Rs 4,951 crore to Rs 18,027 crore. However, the state also got private investment in roads, power and other basic amenities. Both states were part of the erstwhile category of BIMARU states, a group of underperforming states, and started economic reforms simultaneously.

The duo of Nitish and BJP's Sushil Modi -- who served as the state's finance minister before the parties split - also improved the state's earnings. Revenue receipts rose from Rs 15,714 crore in 2004/05 to Rs 1,01,940 crore in 2014/15. During this period, Madhya Pradesh increased its revenue collections from Rs 17,251 crore to Rs 1,03,493 crore. Bihar's economy seems to have grown at a faster pace than the country's. But then, the base from where it started was much smaller. The per capita income of the state is one-fifth the national average.

But Nitish reminds that one must look at where Bihar was 10 years ago.

However, there is a limit to spurring growth through public spending. Bihar's public debt is 26 per cent of gross state domestic product, or GSDP, though it has halved in the last decade. In terms of value, it stands at Rs  75,416 crore. And the major contributor to revenue receipts is liquor, roughly 2 per cent of the GSDP. Following this (public spending) philosophy, Nitish is pushing for a special status for Bihar under which the Centre foregoes its share of taxes and promotes industrialisation. Also, the state's contribution to centrally-sponsored scheme becomes marginal. But this proposal has few takers in New Delhi.

'Time has come for Bihar to take the benefi t of Make in India and Skill India campaigns with help from the Centre', says Sushil Modi, Former Deputy Chief Minister. (Photo: Rajwant Rawat)
Abhijit Sen, former member of the Planning Commission who has worked closely with the Bihar government, sees merit in the idea. JD(U) leader Pavan Varma says, "If a state can reduce the cost of manufacturing for any player, obviously he would come. The special status will allow this." BJP leader N.K. Singh disagrees. He says things have moved ahead and the state will have to become more competitive to attract investments. Here, the BJP is promising industrial hubs and private investment in areas such as power. "Time has come for Bihar to take the benefit of 'Make in India' and 'Skill India' campaigns as well as other development projects with help from the Union government," says Sushil Modi.

"The history of caste politics spoiled the state's business environment. If India is young, Bihar is younger. The median age in the state is 20, significantly lower than the national average of 27. There are opportunities not only to showcase good governance but also to develop businesses," says Rituraj Sinha, COO, Security and Intelligence Services Ltd, the country's leading security and cash management company.

N.K. Singh says the bigger problem is that Bihar is sitting on huge undeployed funds. "The closing cash holding, which was Rs 3,900 crore at the end of March 2014/15, is now over Rs 7,303 crore, five times the permissible ways and means limit. It is significantly higher than the figure in most comparable states. This means that Bihar needs to significantly improve its implementation capability," he says.

'The history of caste politics destroyed the state's business environment. There are opportunities to showcase good governance', says Rituraj Sinha, COO, COO, Security and Intelligence Services Ltd.
Even among its peers, the state is falling way behind. Among the erstwhile BIMARU states, Madhya Pradesh and Rajasthan have moved ahead by pushing industrialisation. As per the recent World Bank report on ease of doing business, Madhya Pradesh is among the top five states. Even Uttar Pradesh and Rajasthan are in the top 10 list; Bihar is at 21. "Investors seek confidence in the government which can deliver reforms at a rapid speed. This can be assured only by a national party like ours," says Sushil Modi.

In July-end, the state government began work on improving its rank with the Department of Industries signing an MoU with the Confederation of Indian Industry and Lee Kuan Yew School for Public Policy, Singapore. It will prepare a vision document for ease of doing business in the state.

THE GREAT PROMISE OF BIHAR

A recent research report by economist Nitin Desai suggests that the bulk of India's demographic dividend till 2050 will be in Jharkhand, Bihar, UP and Rajasthan. UP, Bihar and West Bengal are home to one-third of India's population. "If you have to do business in the east, you will have to be in Bihar," says Harsh Sharma, President, Baidyanath Group, a manufacturer of ayurvedic medicines. He is setting up a Rs 10 crore plant in Hajipur from where he is looking to export to Nepal. "We wanted to set up a unit in Nepal but recently Maoists there bombed a unit of one of our competitor. Roads connecting Nepal are fine for moving products," he says. He is one of the biggest investors the Nitish government has managed to attract in the last one decade. "But to attract more private players, one would require hand-holding and ensuring confidence in the state government," says S.P. Singh, CEO, Kalyanpur Cements.

203KWH This is Bihar's per capita consumption of power. The national average is 1,010 KWH

But whoever forms the government at the end of November will have to continue the reform agenda. Awesh Jain of Ruchi Soya, one of the biggest investors in the state, wants more hand-holding by state agencies, especially in land acquisition. Six years ago, when Ruchi Soya decided to invest in Bihar and sent Jain to scout for land, he identified a parcel on NH-II near Sasaram, en route the dedicated freight corridor. "Our challenges started from there. We required roughly 80 acres. The state asked us to deal directly with farmers. For this, we had to deal with roughly 70 farmers and pay five times the market value of the land," he says.

Interestingly, in the battle for one-upmanship, the JD(U) has been opposing amendments to the land acquisition law that will make it easier for companies to acquire land. "Today, the state government is finding it difficult to find land for expanding or shifting the airport. The decision to oppose the land Bill was political, but today it is not possible to get land for infrastructure," says a senior bureaucrat in Patna.

The private sector, though, continues to be wary that a hung assembly may be a big setback to reforms. BT, for this story, spoke to 42 businessmen from the state, across sectors, who roughly backed Sushil Modi's claims that in the 30 months since the split between the JD(U) and the BJP, reforms in the state have lost steam.

In November, when voting machines open, here's hoping that people of the state are the real winners.

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close