Bihar's industrial growth throughout the planning era has been less than half the national average, in spite of having India's, and indeed one of the world's, richest mineral belts in the form of the Chhotanagpur plateau until four years ago. Industry has contributed just about 11 per cent to the state's income, against the national average of 25 per cent.
The state's 54 PSUs have accumulated a net loss of Rs 5,060 crore, against a net investment of Rs 8,168 crore. The Comptroller and Auditor General found 32 of them "non-working". In addition, seven of the 13 Central government units in Bihar have been "declared sick", which means they have been incurring significant losses over a period of time and their net worth has eroded by 50 per cent or more.
Private to Public
A number of these public sector units were taken away from private hands. Sugar, for instance. For about two to three decades after Independence, Bihar was among India's leading sugar producing states, with a flock of sugar mills in its north parts. But in 1976, the government took over these mills. The industry has witnessed a steady decline since.
Yarn manufacture is one of Bihar's oldest industries. But not only are yarn mills facing regular closure, the dependent weaving industry has also been rendered sick because of this. A significant factor has been the fact that a number of mill owners sell their produce to traders or middlemen, and poor weavers are forced to buy it from them at much higher rates.
{{/usCountry}}Yarn manufacture is one of Bihar's oldest industries. But not only are yarn mills facing regular closure, the dependent weaving industry has also been rendered sick because of this. A significant factor has been the fact that a number of mill owners sell their produce to traders or middlemen, and poor weavers are forced to buy it from them at much higher rates.
{{/usCountry}}New projects get sanctioned, but not implemented. A large number of PSUs have been "under construction" for the last several years. All of this points to poor management and financial indiscipline.
One outcome is the state's poor urbanisation rate of 10.4 per cent, against the national average of 25.7 per cent. The trend of urbanisation has actually slowed down in the last decade compared to the one before.
Lack of Infrastructure
Absence of infrastructure is one of the biggest bottlenecks. Industry cannot develop without power, and Bihar faces perhaps India's worst power crisis. Generation capacity is low. The Bihar State Electricity Board produces only about 20 to 30 per cent of its capacity. Then, more than half of what is generated is lost due to poor transmission lines and rampant thievery.
Another infrastructural failure is transportation. Several areas remain untouched by roads and rails even today. Many existing "roads" are leftovers from colonial times, and haven't seen any rebuilding in decades. "Gauge difference" has severely hit transfer of raw materials from the south to the north. A section as busy as Patna-Gaya continues to be on metre gauge.
The Ganga, which divides today's Bihar almost equally, needs better bridging. The Mahatma Gandhi Setu came up at Patna after decades of wrangling between the Centre and the state. But even this is too narrow for the demands of industrial development.
The capital-intensive nature of Bihar's industry has been a major factor behind its slow development. According to estimates, Bihar employs only half the number of workers for the same amount of capital as Gujarat and other major states.
Role of Financial Institutions
The role of financial institutions has been unquestionably unfair. Bihar has slipped behind most other major states in its share of assistance from national financial institutions. The treatment from commercial banks has been similar, as evident from the state's low credit-deposit ratio.
Financial institutions collect more that Rs 2,000 crore of funds from Bihar, yet they make no attempt to invest a reasonable proportion of this here itself. While the nationwide norm is 60 per cent, Bihar's CR ratio stands at a low 20 per cent.
The small scale sector has been the worst-hit by financial disregard and administrative apathy. The Bihar State Credit and Investment Corporation was set up specifically to finance small scale industries, while the Bihar State Small Industries Corporation was established to procure and supply them raw materials, and market handloom, handicrafts and other products of this sector. But neither of them has made much difference.
Today, with the separation of the Jharkhand and the loss of the mineral-rich Chhotanagpur plateau, the situation looks bleaker than ever.