Bihar's pro-business reforms
There is more talk about reform than action in India's poorest state
It's difficult to stir up business
IT IS surely no coincidence that Bihar, besides being India's poorest state, has also been its least inviting for entrepreneurs.
That is supposed to be changing. Nitish Kumar, Bihar's chief minister, has spent his five years in office fixing the roads and other infrastructure.
Crime has fallen, so the bright and wealthy are no longer frightened off by the threat of kidnapping, extortion and murder.
Stability has allowed local trade to flourish.
A state official reels off an impressive-sounding list of 398 approved investment proposals—from sugar mills to power plants—worth $4.8 billion.
That all sounds rosy, until you look for success on the ground.
India's tycoons have visited, and left.
There is not one example of a big industrial investment to show for it.
Perhaps local officials are failing to spot the brightest entrepreneurs—those deft enough to avoid the bureaucrats.
Take the case of Husk Power Systems, formed in 2007 by three young Biharis and an American friend.
It runs 50 micro power plants in rural areas fired by burning otherwise useless rice husks.
Now employing more than 250 people, the firm sells cheap electricity to 200,000 rural folk, who previously relied on kerosene lamps or candles.
Each power plant turns a profit in a few months, and Husk plans to build hundreds more in the next two years.
But that is no thanks to Bihar's pen-pushers.
Scientific advisers in Delhi were “very helpful” with permits and business contacts.
But the entrepreneurs try to avoid contact with the Bihar government as much as possible.
An early brush-off from one of Mr Kumar's deputies set the standard for their treatment.
Ratnesh Yadav, one of Husk's founders, describes constant struggles with local corruption.
A village policeman grabbed a bundle of cables for one of the first plants, demanding a bribe: the company refused, opting to bore him into submission instead.
When Husk started building a centre to train its workers near the state capital, Patna, a neighbourhood tough-guy demanded 100,000 rupees in protection money.
This was refused, so the builders were threatened, then beaten, and a mob flattened the construction site.
A Bihari property developer, while accepting that official corruption is a fact of life, laments how crooked officials in his state prefer “taxing” inputs—the first investments made—to demanding a share in the output of an enterprise, a practice he says is more common in Bengal.
Bengal-style graft at least means officials have a long-term interest in seeing the business thrive.
The state government talks some fine talk about having made things easier for businesses, such as creating a “one-stop window” for them to submit all their paperwork.
But half a dozen businessmen, asked about the window, hoot with laughter.
It is nothing more than a postbox, says one; the papers are simply shuffled on to the same old unresponsive departments.
An investor with political clout can get things done in perhaps four visits.
Otherwise, it's a long wait.