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  • The Bihar State Government has taken a series of measures to improve the investment climate in the state and envisages achieving the industrial development growth rate of 15% per annum. This means, increase contribution of secondary sector in the GSDP to more than 25% in line with the National Manufacturing Policy and ―Make in India‖ initiative.
  • To achieve this goal the State Government has formulated the Industrial Investment Promotion Policy, 2016.

  • Vision: To establish Bihar as the most preferred investment destination by leveraging the state‘s comparative advantages and maximizing employment opportunities for attaining a balanced regional and sustainable development.

  • Mission:
    • Achieve industrial development growth rate of 15% per annum
    • Increase contribution of the secondary sector to the GSDP to more than 25% in line with the National Manufacturing Policy and ―Make in India initiative
    • Create direct employment opportunities for 5 lakh people across all economic sectors
    • Attract on-ground investment of Rs.15,000 crore
    • Create high-end infrastructure facilities to attract investments in the state
    • Eradicate regional industrial imbalance by uniformly extending the benefits of investment to all geographical areas of the state
    • Provide relatively more economic benefits to the priority sections of society such as SC/ST, women, differently abled, war widows, acid attack victims and third gender entrepreneurs.
    • Ensure that industries facilitate skill development of local people, so as to achieve the target of 15 million skilled youths as per the ―Seven commitments of the State Government.
    • Increase the competitiveness of MSMEs and adoption of ―Zero Defect Zero Effect manufacturing practice

  • Scope of Policy: The policy would be applicable to all the new units in the state, with the following conditions:
    1. Any unit manufacturing any item, wherein the manufacturing activity does not contribute in value addition shall not be considered under this policy. Units involved only in trading activities will not come under the purview of this policy.
    2. Units promoted by individuals/ firms/ companies etc. that at any point in the past were black listed by the government(state or central) will not be eligible to avail the benefits of this policy.
    3. Units promoted by individuals/ firms/ companies etc. that at any point in the past has defaulted on any loan availed from any bank or Financial Institutions (FIs)or has any dues payable to government will not be eligible to avail the benefits of this policy.
    4. Incentives under this policy would be applicable only for the investments made in the state.
    5. Incentives under this policy cannot be claimed as compensation for any loss caused to the unit on account of any kind of natural calamity or business reason.
    6. This policy shall be applicable only for private investment, including foreign investment, but shall not apply to public sector investment by Central or State Governments either alone or in partnership with the private sector.

  • General Package of Incentives – Guiding Principles/ General Provisions:
    • These general provisions shall be applicable to all units eligible under this policy.
    • Effective date means the date on which the provisions of this policy come into force. This policy will remain in force for 5 years from the effective date.
    • In the approved project cost considered for incentive calculation under this policy, the cost of land shall not exceed a limit of 10% of the total proposed investment other than the land. Thus in the approved project cost either the actual cost of land mentioned in the project report assessed by the bank/ financial institutions or 10% of the total proposed investment excluding the land, whichever is less, will be considered. This principal shall be followed for examining all investments under this policy.
    • All incentives mentioned this policy under shall be provided post-production i.e. after the date of commercial production/ operations.
    • In case of SC/ ST entrepreneurs, the maximum limit of all kinds of incentives (except for land) shall be increased by additional 15% across all categories (i.e. MSME & large units).
    • In case of women, differently abled entrepreneurs, war widows, acid attack victims and third gender entrepreneurs, the maximum limit of all kinds of incentives (except for land) shall be increased by additional 15% across all categories (i.e. MSME & large).
    • A unit will not get any incentive beyond a period of 5 years from the date of commencement of commercial production or 5 years from the date of end of this policy, whichever is earlier.
    • The incentives will cease either on the exhaustion of the applicable quantum or on the completion of the eligible period, whichever is earlier. Any unutilized incentive at the end of eligibility period shall lapse.
    • Any incentive under any other scheme/policy of the State Government or Central Government availed by a unit will not be considered for calculating the total accruable incentives to the unit.
    • In the event of change in ownership or management of a unit, the same shall be intimated by the unit to the competent authority as defined by the Department of Industries from time to time. If required, a revised Letter/ Eligibility Certificate shall be issued to the unit (in the name of new owner) for balance incentives. The eligibility period shall not be extended under any circumstances and shall continue to be defined with effect from the original date of production.
    • In the event of any change in the shareholding pattern of a unit promoted by SC/ST/ women/differently abled persons/ war widows/ acid attack victims/ third gender entrepreneurs within 5 years of start of the commercial production, the new shareholders should be from the same category. In case the new shareholders are not from the same category, the amount of incentive extended to such units shall become liable to be recovered from the date of availing such incentives along with interest compounded annually @ 18% per annum.
    • If any false declaration is given for the purpose of availing incentives or if any incentives are availed for a unit that was not eligible, the amount of incentives are liable to be recovered from the date of availing such incentives along with interest compounded annually @ 18% per annum. In case of non-payment within the stipulated time, the State Government may recover such amounts including interest as arrears of land revenue.
    • Any attempt to break/ divide or merge units only for the sake of availing higher amount of incentive without substantial operational reasons shall be treated as misrepresentation of facts and will attract penal action as decided by the competent authority.
    • Any existing or new units, expanding its capacity, diversifying, or modernizing during the policy period will be given the benefits as applicable to new units on their incremental approved project cost. To avail the benefits, there must be a capacity expansion/modernization of at least 50% of the capacity of the existing unit.
    • Negative list of industries/sectors which shall not be eligible for any incentives under this policy are stated in ―Annexure II – Negative list of industries‖. These industries/sectors shall not be eligible for any incentive, including under the GST regime.
    • All matters of interpretation/disputes shall be decided by the Industrial Development Commissioner/ Principal Secretary, Department of Industries. Such interpretation/decision shall be final.

  • Package of incentives
Type of IncentiveSalient Features
1. Reimbursement Stamp Duty/ Registrationa) No stamp duty to be paid in respect of land allotted by the government to IDA/ BIADA.

b) 100% reimbursement of stamp duty/registration fees levied on lease/ sale /transfer of industrial land/shed as also those outside the jurisdiction of Bihar Industrial Area Development Authority would be available to all the new units after the unit commences the commercial production. This reimbursement of stamp duty and registration fees will be granted only for the first time and will not be applicable in subsequent stages of lease/sale/transfer. This incentive will be available to new units only.
2. Land Conversion Feesa) 100% reimbursement of ―land conversion fees‖/ ―change in land use‖ fees being levied for conversion of agricultural land after the unit commences the commercial production.
3. Interest Subvention a) State shall extend ―Interest Subvention‖ to all the eligible units on the term loan availed by the unit from a scheduled nationalized bank or financial institution approved by RBI/SEBI.

b) Rate of interest for interest subvention will be 10% or actual rate of interest on term loan, whichever is lower. For micro and small units, there shall an interest subvention of 12%.

c) The overall limit of this subvention for priority sector units will be 30% of the approved project cost. The subvention limit for non-priority sector units shall be 15% of the approved project cost. The upper limit of this subvention shall be Rs.10 crore.
4. Tax related incentivea) All new units can avail tax related benefits with a maximum limit as defined below:
i. Non-priority sector:70% of the approved project cost
ii. Priority sector: 100% of the approved project cost

b) All new micro and small units will be given tax benefits by additional 30% of the approved project cost.

c) All units engaged in generation of solar and/ or renewable energy for commercial purpose will be given tax benefits by additional 30% of the approved project cost.

d) All new units will be entitled to avail 80% reimbursement against the admitted VAT/ CST/ Entry Tax deposited in the account of the State Government (excluding strictly any tax paid by them arising out of a purely trading business), for a period of 5 years from the date of commencement of commercial production. The VAT/Entry Tax/CST reimbursement shall be applicable only to the net tax payable, after adjustment of input tax credit against the output tax liability.

e) Government of India is in the process of introducing a uniform Goods & Services Tax (GST) regime throughout the country. In case GST becomes effective, the tax related benefits will be suitably modified.

f) All new units shall be eligible for 100% reimbursement of the electricity duty on power including captive power consumed by the same unit or exported to the BSPHCL from the date of commencement of commercial production for a period of 5 years subject to the overall limit defined above. Electricity duty exemption will not be available on captive power exported to entities other than BSPHCL.
  • Dovetailing with Central Government policies and schemes
    • Dovetailing of incentives with the Central Government schemes would be allowed under this policy subject to the condition that the same asset should not be covered under both the State and Central Government schemes. Thus, in case of grant availed/ to be availed by the promoter on a particular asset of the unit under any scheme of GoI, the approved project cost for the purpose of calculation of incentive under state policy will be arrived at by deducting the value of that asset.

  • Special Incentive Package for Scheduled Caste and Scheduled Tribe Entrepreneurs
    • In case of a new unit established by a SC/ ST entrepreneur, the rate of interest for interest subvention will be 11.5% or actual rate of interest on term loan, whichever is lower (except for Micro and Small units). In case of micro and small units being established by a SC/ ST entrepreneur, the rate of interest for interest subvention will be 13.8% or actual rate of interest on term loan, whichever is lower.
    • The overall limit of this subvention will be 34.5% of approved project cost (for priority sector projects)/ 17.25% of approved project cost (for non-priority sector projects). The upper limit of this subvention shall be INR 11.5 crore.
    • In case of a new unit established by a SC/ ST entrepreneur, she/ he will be entitled to avail 92% reimbursement against the admitted VAT/ CST/ Entry Tax deposited in the account of the State Government (strictly excluding any trading related taxes paid by them), with a maximum limit as defined below:
      • i. Non-priority sector: 80.5% of the approved project cost
      • ii. Priority sector: 115% of the approved project cost
    • The State Government will provide Project Management Consultancy support to SC/ST entrepreneurs to facilitate the establishment and operation of units.
    • Special clusters shall be created for such entrepreneurs with common facilities.

  • Special Incentive Package for Women, Differently abled persons, War widows, Acid attack victims and Third gender entrepreneurs
    • In case of a new unit established by women, differently abled persons, war widows, acid attack victims and third gender entrepreneurs, the rate of interest for interest subvention will be 11.5% or actual rate of interest on term loan, whichever is lower (except for Micro and Small units).
    • In case of micro and small units being established by women, differently abled persons, war widows, acid attack victims and third gender entrepreneurs, the rate of interest for interest subvention will be 13.8% or actual rate of interest on term loan, whichever is lower.
    • The overall limit of this subvention will be 34.5% of approved project cost (for priority sector projects)/ 17.25% of approved project cost (for non-priority sector projects). The upper limit of this subvention shall be INR 11.5 crore.
    • In case of a new unit established by the entrepreneur, he/ she will be entitled to avail 92% reimbursement against the admitted VAT/ CST/ Entry Tax deposited in the account of the State Government (strictly excluding any tax paid by them arising out of a purely trading business), with a maximum limit as defined below:
      • i. Non-priority sector:80.5% of the approved project cost
      • ii. Priority sector: 115% of the approved project cost

  • Dovetailing with State Government Schemes for MSME Cluster Development
    • Dovetailing of incentives under the Chief Minister Cluster Development Scheme for the establishment of the CFCs would be allowed under this policy. It would however be subjected to the condition that the same asset should not be covered under both the industrial investment promotion policy and the said scheme. Thus, in case of incentives availed/ to be availed by the promoter on a particular asset of the CFC under the said scheme, the approved project cost for the purpose of calculation of incentive under industrial investment promotion policy will be arrived at by deducting the value of that asset.

  • Incentive for Private Industrial Park
    • The private industrial park can be established by an individual promoter/ partnership firm/ LLP/ company or any entity registered under the Companies Act/ Societies Act.
    • The promoter of the park has to arrange for the land. The State Government would not have any role in arranging the land for the park.
    • The minimum area of the proposed private industrial park should be 25 acres (3 acres in case of IT parks).
    • The land proposed for the park should be under the absolute possession of the promoter and should be free from any encumbrances. It should not have been obtained/ owned by the promoter on leasehold basis.
    • At least 20% of the land would be earmarked for the general use/development of basic infrastructure/ green area and future requirements.
    • The industrial park shall have a minimum of 5 independent production units.
    • The promoter would be responsible for the allotment of land/plots to the individual units. The State Government would not have any role in this.
    • The promoter shall not create residential units in the industrial park or convert the industrial park into a real estate project. The industrial park shall only be used for industrial use. All private industrial parks shall be notified as industrial lands. Under no circumstances a private industrial park shall be put into any other use other than for industrial purposes.
    • The rates for the industrial plots in the private industrial park would be ascertained by the promoter. The State Government would not have any role in this.
    • The promoter of the park would create a fund called ―Development Reserve Fund (DRF) for the development of external infrastructure of the park. The promoter would contribute 5% of the fund collected through land allotment and 10% of the Annual Net Profit in the DRF. The DRF would be maintained in the form of a fixed deposit. A committee would be constituted for the operation of the DRF. The committee would consist of promoter/ representatives of the promoter and units operating in that park. At any point of time, a maximum of 33% of DRF can be used for the development of the appropriate infrastructure. Further, the promoter would charge a maintenance fee from the operating units in the park. The same committee would be responsible for the operation of the fund created from the maintenance fee collected.
    • A private industrial park would be eligible for an interest subvention at the rate of 10% or actual rate of interest on term loan, whichever is lower, to the extent of 30% of the approved project cost subject to a limit of INR 5o crore.
    • A sector specific private industrial park for the priority sector units (for e.g. food parks, leather parks, textile parks, IT parks etc.) would be given an interest subvention to the extent of 35% of the approved project cost subject to a limit of INR 5o crore.
    • The promoter of the private industrial park shall be eligible for the interest incentive after the completion of the park.

  • Preferential purchase policy
    (a) The purchase preference policy shall apply to only those MSME firms/units wherein the manufacturing activity results in significant value addition. Simply trading and packaging units shall not be eligible for price preference.
    (b) MSMEs quoting prices within 15% of the lowest eligible price bid of other bidder(s) shall be eligible for purchase preference in the state. In such cases the MSME unit shall be given an order of 15% of the total order value on the lowest eligible price bid. In case of a tie, the state based MSME units will be given the preference.
    (c) If it happens that two or more state based MSME units are within L1 + 15% range, all such MSMEs will be given an opportunity to accept the L1 price and the 15% of the total order value will be equally distributed amongst these MSME units.
    (d) The preferential purchase policy shall also apply to contractors and sub-contractors where at least 15% of the products should be procured from the local MSME units in case the product is manufactured in the State.
    (e) The criteria of turnover or age of the firm shall be relaxed by 50% for the MSME units based in Bihar if they meet the technical specifications of the products.
    (f) A list of products to be procured only from MSME sector in Bihar shall be notified by the State Government. Limited tenders amongst the MSME units based in Bihar shall be invited for the purchase of such products.

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