Centre wants Bihar to sign MoU on reforms process

The Finance Ministry has constituted a dedicated Bihar Cell in the Planning Commission under its Deputy Chairman K C Pant, which will ensure that with the help of better financial management and adequate devolution of funds from the Centre, multifaceted development of the region takes place, especially with respect to core infrastructure. The cell will also study the revenue and expenditure patterns of the undivided Bihar so as to plan a package for the divided Bihar.

However, the Finance Ministry has made it clear that there is no way that it can make available any significant quantum of resources as desired by the Bihar Assembly or by some leading politicians of the State. The Bihar Assembly has demanded a compensation of Rs 1,79,000 crore for the rest of Bihar, if Jharkhand was to be carved out as a separate State. The rationale being that post-division, Bihar would have major financial deficits while the new State of Jharkhand will have a surplus.

The Finance Ministry is of the view that for any kind of assistance, Bihar should sign a fiscal reform MoU with it as has been done by most of the other northern states and initiate reforms in various sectors. The Centre is ready to help it out by way of models and programmes.

The Cell will assist Bihar in identifying areas through which it can increase its revenue and reduce expenditure. It would also help it to identify income generation and productive economic activities in which the State has a comparative advantage.

The Cell will also examine the issue of public sector investments historically made in undivided Bihar. The claim is that most Central Government investments in Bihar have been made in the southern region and therefore, the remainder of Bihar has a claim on Central investments. Here again, the exact figures of PSU investments, railways, roads, irrigation, telecom need to be worked out in order to be able to assess the situation.

An important dimension of economic activity in north Bihar relates to flood control and ground water management. While internal policy and management improvements may make some difference in tackling the issues, there are international ramifications also with the Nepal Government, and there is a role for the Central Government in finding solutions.

Potential for growth in agriculture and other economically productive activities and strategies, for achieving the same, will also be explored by the Cell. It will also review precedents relating to economic issues in previous cases of state bifurcation.

The Cell may take help of specialised institutions in this task. Once started, the review exercise will be done every three months, it is planned.