World Bank has recently announced its country strategy for India for period 2013-17. This strategy brings in some good news for underdeveloped states, including Bihar. As such bank has proposed yearly funding plan of between $3 bn to $5 bn for India over the next five year period. Sixty percent of the same would be for state government sponsored projects, with half of this, ie 30% of overall lending, earmarked for low income states. This would be significantly up compared to earlier figure of 18% for period 2009-12. Another significant aspect of this is the proposed engagement of IFC, a World Bank arm, in increased measure in developing infrastructure in the low income states. This policy prepared through wider public consultations is in right direction. However, question which should concern citizens of Bihar is whether their government has got its basic rights to reap the full benefit of this change in World Bank policy?

In this regard, it would be interesting to examine few more aspects of the new policy. Stated objective of the new policy has been articulated in terms of reducing the overall poverty level in India. Policy seeks to achieve the same by increasing funding focus on low income states and hence has also projected a greater allocation of 50% of funding meant for state sponsored projects to these low income states. In remaining portion of the funds as earmarked for central government schemes, higher share is anyway likely to accrue to low income states due to nature of projects in pipeline. World bank country strategy 2013-17 talks about using the following instrumentalities to channelize more funds to low income states:

·         Renewable & green energy projects

·         Logistics & Infrastructure finance

o   Power sector- generation distribution & transmission

o   Manufacturing –specifically SME sector, Land bank (may include development of Industrial parks and Manufacturing Zones by implication)

·         Food Processing

·         Agribusiness

·         Urbanization

o   Development of midsized city

o   Funding for Low income housing

·         Social sector support:

o   Improving Health Care System

o   Improving Nutrition

o   Strengthening Secondary Education

o   Supporting Tertiary Sector

o   Funding for increasing Social Protection Coverage

o   Financial Inclusion

These instrumentalities have been categorized in themes like integration, transformation and inclusion. IFC is projected to have a major role in regards to renewable & green energy projects, logistics & infrastructure sector, Urbanization and also finance & insurance.

Given the aforesaid thrust, it would be of interest to examine the preparedness of Bihar in taking advantage of this funding. Especially, IFC funding would require a shelf of economically viable projects. Moreover, funding from World Bank, especially IFC, would assure only an avenue for funding but the initiative to create viable project shelf would rest on state government. Moreover, these funds will not come as doles. Rather would have market linked cost of funding associated with it. Accessing such funding would be prudent only if higher economic rate of return than the cost of funding involved can be ensured.  Accessing such funds without having self sustaining return model will move the state economy towards a debt trap. Also, given the commitment under FRMB, it would be difficult for state to access this window on large scale unless some innovative arms length financing instruments are used for the purpose. Track record of government of Bihar is, however, quite lackadaisical on this count.  So far it has relied mostly on plain vanilla funding instruments and in most of the instances on doles and concessional funding. It is suspect if the state can structure projects to make them intrinsically economically viable without having recourse to state exchequer. Going by the ideological stance of the ruling dispensation it seems a far cry. Any funding will necessarily have recourse to state exchequer for repayment, attracting FRMB provisions.

On operational level, Bihar faces capacity constraints in conceptualizing large sized projects and executing the same in time bound manner as would be required under funding by these multilateral funding agencies. Ability to deliver on project execution by state agencies, with exception of BSRDC and BRPNN, is yet to be proven. Tapping into higher share in the available resources through IFC route would call for Scale, Speed and Skill, which is not a known characteristic of administration in Bihar. Absence of these attributes has stymied performance in regards to MNREGA, JNNURM, NGRBA and many such centrally sponsored programs. Having access to funding is one thing, ‘Making Things Happen’ is quite another. One does not automatically gets translated in other as is best exemplified in our Bihar experience. Also, a capacity constraint of not having a larger shelf of economically viable projects is an added stumbling block.

On positive side, however, plan for power generation sector, viz, Chausa, Kajra, Pirpainti and Nabinagar (NPGC) phase II can benefit from the funding available through IFC window. Even the plan for one secondary school in each panchayat can get a leg up due to aforesaid priority of World Bank. Then there are four lane road projects from Tajpur to Bhittamore and Hajrat-Jandaha- Vaishali which could use some of this available funding.

On the flip side is the absence of a clear plan for tertiary education. State has not come out with a definitive entitlement based plan for higher/ technical/ professional education sector as it has now done in case of secondary education. Unlike secondary education, it is possible to structure tertiary education in an intrinsically viable funding model.  Then, there are a number of large sized projects stuck at the pre-conceptualization stage. Possible major projects, including intrastate river linking, Dagmara Hydropower, Indrapuri Hydropower Project, Sapt Kosi High Dam and Sun Kosi Diversion Project, Metro Railway Projects for Patna etc are likely to miss this funding window given the stages in which they are stuck at present. Performance of state in utilizing funds earmarked under JNNURM does not inspire any confidence on utilizing World Bank funds for urban transformation. In fact, DFID is already providing a handsome funding as doles for making cities more liveable. Still, execution speed of such projects is not up to the mark. Even the proposal on Raxaul-Paradip Eastern Economic Corridor has not progressed beyond ideation level. With World Bank focus on funding infrastructure in low income states, meaning states like Bihar, Jharkhand, Odisha etc such a project would make imminent sense for being proposed for funding to it.  

It is important that state conceptualizes some large scale infrastructure projects and moves expeditiously on the same to take advantage of these available funding sources. Eastern Economic Corridor, Baliya-Tejnarayanpur Ganga Expressway, Hajipur- Samstipur-Kusheswarsthan- Mahishi- Madhepura- Purnia Infrastructure Corridor could be some typical large infrastructure projects. Development of infrastructure in Nalanda to support proposed Nalanda University and a ‘Multi Agency Multi Institutional International Research Complex’ could also be explored. State can also look for launching integrated grid projects like intrastate irrigation canal grid, intrastate gas grid, piped drinking water grid, village level broadband connectivity grid, solar panel grids and inland waterways based transportation grid.

On the whole, reorientation of World Bank focus on low income states in India is a welcome step. Now it is upon the leadership and administration of these states as to how they are going to take advantage of this opportunity.