“As Bihar is an economically backward state, it deserves the status of Special Category State just like Himachal Pradesh, Uttarakhand and the eight north-eastern states. This will help attract private investment and reduce the burden on the state which is currently the predominant engine for development,” he said during his meeting with the Union Finance Minister, Pranab Mukherjee today.
For the closing year of the special plan of Backward Region Grant Fund (BRGF) the Chief Minister demands that Bihar would need Rs 3,145.43 crore for completing the ongoing schemes. This includes Rs 805 crore for the revised estimate for state highway works in progress and Rs 389 crore for the revised cost of the rail-cum-road bridge on River Ganga at Patna with approach roads. He also demanded full release of BRGF fund earmarked for 2011-12.
According to him, as long as private investments do not flow, Bihar needs to enhance public investment. Bihar’s GDP at 2004-05 prices in 2010-11 has been estimated at Rs 1,34,323 crore and its per capita income was 37.6% of national average. Bihar needs to augment its GSDP by Rs 2,22,919 crore at 2004-05 prices to achieve the national average. Taking a conservative estimate of ICOR at 3:1, it would need an investment of Rs 6,68,757 crore at 2004-05 prices.
The Chief Minister further explained that assuming 70% of investment would flow from the private sector, the public sector investment needed for achieving the national average growth level will be Rs 2,00,627 crore which when spread for a period of five years works out to an annual investment of Rs 40,125 crore at 2004-05 prices or around Rs 60,000 crore at current prices. Given Bihar’s historically large development deficit, the burden needs to be shared between the central and the state government.
He alleged that the Bihar’s share of grants under the 13th Finance Commission has fallen to 10.917% of tax devolution from 11.028% in the 12th Finance Commission. This deficit has to be compensated with special grants.
He urged the Union Home Ministry to expedite the process so that Bihar gets Rs 5,030.71 crore (as on March 31, 2010) in pension liabilities and Rs 285.78 crore in State Government Guaranteed Bonds from Jharkhand as per Bihar Reorganisation Act, 2000.
The ceiling of borrowing limit for 2011-12 fixed at Rs 6342 crore should be raised upwards to allow Bihar to make adequate market borrowings.
The Bihar Chief Minister urged the Union Finance Minister to tell the commercial banks to increase their lending in the state. Bihar’s cash-deposit ratio at 32% is way behind the national average. While banks’ deposits have crossed Rs 100,000 crore, their credit profiles have not kept pace.
Bihar faced second consecutive drought in 2010 and hence the Union Finance Ministry should approve interest subvention scheme for Bihar. The roll out of core banking system needs to be expedited in Bihar, particularly for Grameen Banks.
The Union Government should release the balance of Rs 1000 crore sanctioned by the Planning Commission for the State Plan in 2010-11.
Centre should fund 90% of the cost for the implementation of RFCTE Act in Bihar. Given the state’s historical development deficit in physical infrastructure it requires a one-time investment of Rs 19,000 crore phased over a few years and and Rs 12,000 crore annual recurring fund.
The Bihar Chief Minister suggested drastically reducing centrally sponsored schemes (CSSs) and devolving funds allocated for different sectors in consultation with the state governments. He said that all central government’s funds should be routed only through the Consolidated Fund and not through any government sponsored societies.