Will 2015 Assembly elections change the fate of startup ecosystem in Bihar?

With tall words and promises made by individual parties for budding entrepreneurs, is Bihar Legislative Assembly elections 2015 likely to bring some relief for the State’s startups? A growing emphasis on startups has been observed in Bihar with the government working towards creating a strong policy that will promote newer initiatives.

The current ruling party has spoken about creating a better environment for entrepreneurship by providing students who have cleared Class XII exams a credit card to help secure a bank loan of Rs four lakh with the State government, providing a three per cent interest subvention on the loan.

Abhishek Kumar, Secretary General, Bihar Entrepreneurs Association (BEA), says, “On our strong push, the government has talked about setting up a Venture Capital fund of Rs 500 crore. We asked for 1,200 crores for 10 years for startups. When we talked to Union IT Minister, he also agreed to all the proposals by BEA and showed his eagerness to support. The Union MSME Minister too extended his support.”

Barriers to growth

Hansa Sinha, Co-founder, Genesys Consulting (Patna-based startup), says, “The government is not very approachable; they will listen only during elections. In Bihar, there is a lack of big investments, stringent bank loan policies, unawareness of schemes for startups - limiting only to government files, legal hassles in incorporation-related issues, non-availability of business loans on reasonable interest rates, lack of business land, sky shooting rates, high office rentals, lack of infrastructure, dearth of good and employable talent, no IT hubs or platform for budding startups to showcase and exhibit their ideas. Although BEA is working towards a better path, Bihar needs a focussed approach towards helping entrepreneurs grow.”

The State needs to address various social development concerns like basic infrastructure -- roads, electricity, drinking water, schools and sanitation. The need of the hour is to provide the people of Bihar a more conducive environment to live in.

The population of Bihar is 10,40,99,452, among which the number of households is 1,89,40,629. Urban households with drinking water, electricity and toilet are 6.28 per cent. Rural households with drinking water, electricity and toilets constitute 4.59 per cent.

Amar Jamdhiar, Founder, Medi360 (a directory of integrative health centres) highlights some of the issues that are hurting the startup ecosystem

• Focussed policy only towards manufacturing and agriculture sectors
• Non-availability of information about government schemes and subsidies to the budding entrepreneur
• Huge dependency on bank loans for initial capital needs of the entrepreneur
• No government-assisted platform to interact with investors and private venture capitalists
• Lack of government regulations and tax liabilities
• Lack of incubation centres across colleges or otherwise
• Lack of non-traditional, short-term courses targeting entrepreneurs
• Brain drain and lack of local talent
• Retention of talented resources in Bihar

A sneak peek on the policy

The industrial policy for Bihar focused on nine thrust areas — food processing, agro-based industries, tourism, super speciality hospitals, IT, technical and high education, electronics, hardware and non-conventional sources of energy.

Under this proposed policy, there were provisions for granting incentives such as 100 per cent exemption from stamp duty and registration fees during the pre-production phase, capital subsidy for industrial units, inclusion of Entry Tax in the reimbursement of 80 per cent of VAT, incentive to existing units for captive power generation / diesel generating sets and subsidy on non-conventional sources of energy production, reimbursement of expenses incurred on project reports, technical know-how fees, quality certification, and electricity duty etc.

Amar says, “The last industrial policy for Bihar was updated in 2011. In reality, none of these policies fit the startup fraternity.”

According to Abhishek, BEA has submitted the draft of Bihar StartUp Policy to the StartUp Committee formed by Chief Minister during Bihar Entrepreneurship Summit on March 21 this year. The StartUp Committee has four secretaries of Government of Bihar and two members of BEA.

“The BEA team, along with senior government officials of various concerned departments, has worked on the startup policy outlining the setting up of incubation centres, State venture capital fund, and inviting startups. A mobile app 'Enterprising Bihar’ has been developed by the BEA to provide entrepreneurs information on setting up new units in Bihar,” says Shweta Tiwary, Founder of Patna-based Chungi.

The existing policies for startups include incubation centres and shared office space for startups, capital subsidy up to 35 per cent to set up food processing industry, subsidy on the interest of term loans for agri infrastructure and relaxation in excise duty for exports.

Amendments to twist the policies

It is imperative to structure the policies in such a manner that entrepreneurs are given a platform to sell their products. Focus should be on enterprise development; introduction of loans at low interest rate without guarantee would encourage many entrepreneurs.

Amar states that most of the pointers of current industrial policy are targeted towards large capital-investment-based business. It doesn’t address the needs of startups. The policy requires some amendments, including a single window clearance, tax or government regulatory liabilities on startups for three years, better startup policy to invite investors, government-assisted venture funds, setting up incubation cells at a district level, mentoring and providing financial and marketing linkage to entrepreneurs of all kind.

Chief Minister Nitish Kumar at the second Bihar Entrepreneurship Summit 2015 announced that the government is planning to prepare a dedicated policy for entrepreneurship development on the lines of the Bihar Industrial Incentive Policy.

Shashank Kumar, Founder, Farms n Farmers, mentions some of the amendments:

• Single window systems for entrepreneurs
• Centre of excellence for registration and mentoring support for early entrepreneurs
• Deriving mechanism to bring innovators and government institutions together to scale up and refrain tendering process where entrepreneurs lack
• Clear bank policy for startups

Fostering entrepreneurship in Bihar

Bihar Entrepreneurs Association on March 21, 2015, organised Bihar Entrepreneurship Summit in association with Department of Industries, Government of Bihar. The Summit fostered incubation and mentorship support from industry experts, investors, traditional and non-traditional financing possibilities for business ideas, prototypes, and startups etc. The theme of the summit was Udyami Bihar, Samridh Bihar (Enterprising Bihar, Wealthy Bihar).

Abhishek says, “The BEA and Information Technology Department have agreed upon setting up a 50,000 sq.ft office space for startups in the State capital.”

The key aim of BEA is to create and promote entrepreneurship at the grassroots level starting from village and district level and inculcate innovation and social change drivers in young minds.

In a bid to foster entrepreneurship in Bihar, some key initiatives taken are:

• Bihar StartUp Yatra at district level to create awareness at colleges for micro entrepreneurship.
• Setting up of District StartUp Centre in all 38 districts of Bihar since October 2014.
• IT Incubation Centre already set up with Department of IT, Government of Bihar at prime commercial location in Bihar: Biscomaun Tower.
• Incubation centre in science colleges in Patna, NIT Patna and Mirza Ghalib College Gaya.
• Establishment of Bihar Incubation Centre in association with Department of Industries, Government of Bihar by State cabinet.
• Thirty-one startups shortlisted to kick off their journey from Dec 1, 2015.
• A team from BEA and senior government officials of concerned departments is working on the startup policy which includes setting up of incubation centres, State venture capital fund, inviting startups etc.
• Startup Yatra in various colleges in Bihar includes Patna Science College, Magadh Mahila College, Patna, T.P. College, Madhepura, SM College, Bhagalpur and Nalanda College.

Hansa says, “BEA provides proactive support towards covering Bihar startups in providing membership offers to entrepreneurs and organising seminars, conferences, meets and discussions for making a vibrant ecosystem of startups and other top-notch established firms.”

Waiting for a stable government

Hansa stated that there is an air of big words from all corners as Bihar entered into the first phase of Assembly Elections on October 12. Startups are pulling up their socks for the new government in Bihar with high hopes and aspirations.

Much like the evolution of the overall startup ecosystem in India over the years, a partial reflection is likely to be visible in Bihar too. Shashank says that the entrepreneurial environment in Bihar has changed significantly in the past five years. More than 50 young entrepreneurs across the globe chose Bihar for their respective innovation.

The need of the hour is to create a favourable environment for startups in terms of e-processes, tax benefits and exemptions, easy bank loans, good business properties, rural reach to maximise employment, new industry set-ups so that entrepreneurs who have relocated outside Bihar may come back and proliferate.

“We are just waiting for a stable government. Everything is already on threshold; it's just a matter of time. With its 10,000 members, policymakers and intellectuals, BEA can put pressure on any government to nurture a startup support system,” adds Abhishek.