Why does mineral-rich Bihar continue to wallow in poverty?

When a chief minister of an opposition-ruled state makes a visit to the Durbar to meet Manmohan Singh, there must be a list of wants. When that chief minister in question is Bihar’s Nitish Kumar, one better take notice. This swift forward move from the backward state’s satrap is partly to polish his ‘fighter for Bihar’ image. This also signals its supposed ally in Bihar, the BJP, that his party is not too averse to two-timing.

The BJP secretly wishes that New Delhi does not grant Nitish’s wishlist of backward status and financial package. It then might have to match the Congressite bribe. The matching bribe may come in the form of a more Nitish-friendly prime-ministerial candidate for the NDA. Additionally, Nitish may simply call any grant from New Delhi inadequate and settle with an understanding of a bigger pie from NDA if it comes to power. In short, Nitish’s Bihar can have its cake and eat it too.

Sometimes, such politicking overshadows substantive issues at hand like the ‘backward’ status or special financial package for Bihar. Bihar is one of the bimaru states of the Union whose mineral wealth has been exploited for a very long time. The clues to its special, but not unique, situation are to be found in the enthusiasm with which ruling party leaders from two other states — Orissa and West Bengal — have come out in support of Bihar’s plea and have added their own name to the package-queue.

This might be appear to be an opportunistic gang-up to extract as much as possible from a fragile government with thinning numbers in the Lok Sabha and unsure of the reception at the hustings next time. And that is exactly correct. But what is forgotten in this age of short policy-memory is that New Delhi is also partially responsible for the pathetic industrial scenario in these states for decades.

The mineral-rich states of Orissa, Bihar (with Jharkhand) and West Bengal have been devastated for decades by the freight equalization policy of the centre. By this policy, the central government subsidized the transportation cost of minerals from mining zones to anywhere else in the Union.

Basic ideas of efficiency and cost considerations were thrown to the wind as the centre decided to create an artificial system by which production factories could now be uncoupled from the mining locations themselves.

The natural advantages of these states were neutralized by the central policy that subsidized their deindustrialization. This process went on for four crippling decades, from 1952 to 1993. Today’s industrial map of India is based partly on the policy driven destruction of the competitive advantage of the mineral-rich states.

These eastern-states are text-book cases of what devastation centralist policywallahs can do in a pseudo-federal polity. The begging bowls in the hands of these states are not accidental. These states have never received any reparation for this punitive central policy. That is long overdue. If the centre is too broke to give reparations, then a genuine federal solution must be found where states, and not the centre, would own mines and minerals and control their revenues. It is absurd that coal-producing states like Bihar often pay more to the centre than non coal-producing states to buy their own coal. Revisiting the central, state and concurrent lists to correct this wrong is the need of the hour.

The writer is a postdoctoral scholar, Massachusetts Institute of Technology.
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