Paul H. Appleby, a scholar from University of California, had called Bihar the best administered state in a report submitted to then Prime Minister Jawaharlal Nehru in 1952.

Fifty-four years later, not even the most loyal optimist would dare describe the state in such glowing terms. The task of improving the financial health of the state is cut out for Nitish Kumar.

The state's borrowings have gone up from Rs 10,501 crore in 1991 to Rs 43,153 at present. As a result, 22 per cent of the revenue is spent annually on loan repayment.

Salary payment continues to be high with 37.3 per cent (Rs 4,805 crore) of the income being used to pay government employees in 2004-05.

In the same period, the state spent Rs 16,582 crore on non-development expenses as against its Rs 12,882 crore total earning, including the state's share in central loans.

Bihar's "pure" earning, however, was only Rs 3,765 crore, of which Rs 2,400 crore came from sales tax (now VAT), Rs 272 from excise tax and Rs 429 crore from registration fees.

Contribution to income from tax collection has dipped from 47 per cent in 1991 to 28.96 per cent at present.

The white paper presented in the Assembly in the last session had stated that "the major deterrents are lack of investment, poor markets for agro-products, recurring flood, dependence of 75 per cent of the population on agriculture and industries employing only 10 per cent people".

The document also pointed out that the previous government spent most of the loans it secured to clear backlogs and dues of the state electricity board. The board continues to incur a loss of Rs 107 crore per month.

The comptroller and auditor-general of India had flayed the previous Rashtriya Janata Dal dispensation for paying 12.5 per cent to 14 per cent interest on market loans. The state also could not use Rs 8,000 crore of central funds between 1991 and 2004.

Bihar got only Rs 10,833 crore from the Centre in the past five years while Andhra Pradesh got Rs 15,542 crore.

Assam received Rs 15,700 crore of grants and assistance from the Centre while Bihar had to settle for Rs 10,700 crore even after the Prime Minister announced a "special plan" for the state.

Against this "dismal" financial backdrop, the new government presented the 2006-07 budget estimating an income of Rs 28,944 crore against an expenditure of Rs 29,220 crore. The plan size for the current financial year is Rs 8,250 crore as against Rs 5,525 crore last year and Rs 3,196 in 2004-05.

Chairman of the CII's Bihar chapter Pramod Sharma said the government must have an attractive industrial policy to boost its sagging revenue and morale.

On a positive note, Bihar Industries Association president K.P.S. Kesri said steps were afoot to have a new sugar mill, multiplexes and technical industries in the state, with the chief minister taking "keen interest".

The chief minister, on his part, said the government had already relaxed investment procedures and provided land for two sugar mills and five multiplexes. He hoped that "investors would flood in Bihar in the next two years".