The impact of MSME policy on Bihar

Bihar MSME

Status of Bihar  

About 95% of the industries in Bihar fall under the Micro Small and Medium Enterprises(MSMEs) category, of which, according to a recent RBI report, only 5% were exposed to banks. 

Difficulty in obtaining capital, inadequate and unreliable power supply, zero access to modern technology, dearth of latest information and lack of market and infrastructure were outlined as the major reasons for the dismal growth of MSMEs in the state, at a conference for “facilitating finance for MSMEs in Bihar”. 

“MSME sector is at a very nascent stage in Bihar and needs much more aid than just finance” as stated by Satyajit Singh, CEO Shakti Sudha Makhana, at the meeting of entrepreneurs and bakers of the state. He had suggested the formation of a task force of stakeholders of MSMEs under the government that would address the reasons of sickness in the sector and recommend solutions for its development in a time- bound manner. Micro, Small and Medium Enterprises (MSMEs)  in the state have largely hailed the state government’s approval to the Bihar Industrial Investment Promotion Policy (BIIPP) 2016, saying it will boost the pace of industrialisation and investment. 

Proposals by the Bihar Government 

The Nitish Kumar Cabinet has given green signal to new industrial policy which has food processing and tourism as priority sectors among others. Apart from this, the new policy has small machine manufacturing, IT, textile, plastic and rubber industry, renewable energy, health care, leather and technical education in the priority sectors.

Speaking to KNN India about the new industrial promotion policy, President of Bihar Industries Association (BIA) Ram Lall Khetan had  said that this is a good policy which should bring new investments in the state. He had said “Bihar is an  appropriate place for food processing because it is a consuming state. Raw material is available for food processing industry here. So there is enough scope for food processing in Bihar”. Elaborating about the benefits of the policy, BIA president  had stated that 10 per cent of the interest of the loan given to MSMEs will be borne by the Bihar government and there are other incentives too for women and SC/ST entrepreneurs also. Commenting on Startups, he had  said “that apart from this government has come up with new startup policy which is very good. There are very few states in India having startup policy. The new entrepreneurs will be benefitted out of it.” Government has also come up with the single window system act. It is like if you give one application then the clearance will be given within a month automatically,” he said. 

Throwing light on the issue of power supply, Khetan had said that the electricity situation has improved in the state as compared to earlier and it is improving day by day. “We have high hopes with this new industrial policy. Nitish Kumar government is proactive for the MSMEs,” he had added.  

The promises laid by the policy members 

The policy promises rich incentives including reimbursement of stamp duty and land conversion fees. It would have provision for setting up private industrial parks. (KNN Bureau) 


 Today there is a requirement to provide a new industrialized shape full of industries to Bihar State. There is a need to establish new industries and to revive the sick and closed units of the state. For this purpose favourable environment should be created to attract the investors of state and from abroad. In this connection the Industrial Policy – 2003 has been reviewed. After reviewing the policy, a decision has been taken to prepare a new industrial policy in the present circumstances so that there may be a balanced industrial growth in the state.  In the light of the aforesaid facts a new Industrial Incentive Policy – 2006 has been prepared in consultation with Bihar Industries Association, Bihar Chamber of Commerce, Confederation of Indian Industry and all concerned Government Departments. In the preparation of this policy the Industrial policies of different states have been kept in view.  Under this Industrial Incentive Policy- 2006 there are provisions for granting preproduction incentive of subsidy/exemption from stamp duty and registration fee and post production incentive of grant/exemption for preparation of project reports, purchase of land/shed, technical know-how, captive power generation/diesel generating set, quality certificate. Vat, luxury tax, electricity duty, conversion fee, market fee etc.   With the implementation of this Industrial Incentive Policy- 2006, it is expected that there will be growth in the per capita income of the state and industrial growth as well as accelerated employment opportunities. 

 Steps taken for promotion of the state 

To promote all round development of the state and industrial growth rapid clearance procedures for establishing industries, to issue license and certificates, to provide a congenial atmosphere to the investors of Bihar state and in this regard and for other concerned subjects Bihar Single Window Clearance Act – 2006 has been enacted.  

·       Bihar Infrastructure Development Enabling Act- 2006 –  To provide for rapid development of physical and social infrastructure in the State and to attract private sector participation and to provide for a comprehensive legislation for designing, financing, construction, operation, maintenance of infrastructure projects, so that administrative and procedural delays are reduced, for identifying generic project risks, Bihar Infrastructure Development Enabling Act, 2006 has been enacted.

·        In order to simplify the inspection of factories, provision of self-certification will be made.

·        Industrial growth is adversely affected due to the complicated labour laws. Such labour laws will be made simple and development oriented.

·        Human resources will be developed in such a way, which can promote and create industrialization of high degree. Besides existing different institutions will be strengthened to improve skill.

·        Land Bank- To meet the requirement of land for industries and development schemes, Land Bank will be established in the state. By this Bank, Land will be made available according to the requirements to different industries and for development schemes.

·        Marketing arrangements will be made for small, tiny, cottage industries, handloom and handicraft.

·        For the creation of the basic facilities of international level, to enhance capital investment in the industrial areas and invite the private sector for investment and to encourage public private partnership for this purpose.

·       Development of Infrastructure.

·        In order to revive sick units, to identify such units and to suggest necessary remedial measures and to prevent sickness by developing a district level monitoring system.

·        To develop handicraft, handloom, khadi, silk and village industries.  

Facilities provided under the MSME policy 

1.      Facilities to sick and closed units:   Exemption of Annual Minimum Guarantee (AMG), Monthly Minimum Guarantee (MMG) and delayed payment surcharge to the unit will be granted from the date of declaration of unit as a sick unit. This facility will be available for five years.  

2.FACILITIES FOR EXPANSION-DIVERSIFICATION AND MODERNISATION OF UNIT:  Those units undergoing Expansion/Diversification/Modernisation will be eligible for incentives, upon their incremental production.

3. INCENTIVE ON QUALITY CERTIFICATION:  75% of cost incurred in obtaining certificate of I.S.O. standard (or equivalent) from reputed national/international level organizations, would be reimbursed by the State Government.

4. INFORMATION TECHNOLOGY MISSION:  The State Government would launch an I.T Mission for the development of Information Technology Industries with the following objectives: (i) Economic Development. (ii) Human Resource Development (iii) To provide simple, effective and transparent administration.  (iv) State of the Art Communication System

5. The State Government will provide the following relief / incentive to the Information Technology Sector for its rapid development.  It has been observed that several rules and regulations applicable to industry need not be required for the I.T. industry. As such, there would be a provision of self certification and software units would be exempted from the following: (i) Pollution Control Act to be effective only as per Govt. of India guidelines. (ii) Legal Power Cuts.  (iii) Zoning Regulations in respect of location.

At first on the onset of Nitish government their was a plea for declaring Bihar an SEZ state. But in the present status the state will be eligible to independently entrepreneur a business and considered as the priority states to do business. Various other sectors of MSME are even being considered in the proposals of the Bihar government which often cloud the headlines of various newspapers.


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