Freight corridor investors will benefit in the long term

Written by Rajat Arora | Updated: Apr 16 2013, 07:59am hrs
The 3,300-km dedicated freight corridor, at an estimated cost of R95,000 crore, is one of the countrys most ambitious infrastructure proejcts. While a large portion of the project is being funded by multilateral agencies, the railways, its anchor, is finding it hard to attract private investment for the 534-km-long eastern portion of the corridor. RK Gupta, managing director, Dedicated Freight Corridor Corporation (DFCC), tells FE's Rajat Arora why the project is a lucrative option for private players. Excerpts:

There have been no takers for the 534-km Sonnagar-Dankuni section on the eastern corridor, which was to be constructed on the public-private partnership mode. Do you think this puts a question on the viability of the PPP model for freight corridors

Freight corridor is the most lucrative investment proposition available for private players. We can't see the railways through the same prism as road and other infrastructure sectors. We need to remember that in this project, there is only one client, a nd that is Indian Railways. Its a capital-intensive sector with a long gestation period. Five years are needed to construct the corridor and traffic will pick up in two-three years. But in the long term, the freight corridor would benefit investors.

During an investors meet, we got feedback that an investment of R15,000 crore for a 534-km stretch is too high and therefore the entire stretch needs to be bifurcated into two parts. Investors would then see the value and place their bids.

What is the current status of the DFC project

The construction of the first 1,000 km of the corridor, 650 km of the western corridor and 343 km of the eastern corridor, costing around R10,000 crore, will start this month. The funding of the western corridor is being done by Japan International Cooperation Agency (JICA) and the eastern corridor is being funded by the World Bank.

The entire DFC project is envisaged to entail investments of R95,000 crore. The contract for the construction of a 640-km-long route, from Rewari to Palanpur (western corridor), at a cost of R6,500 crore, will be awarded in a few days. On the eastern corridor, a consortium of Tata Projects and Spanish firm Aldesa have been awarded a R3,300-crore civil works contract to build a rail track between Kanpur and Khurja in Uttar Pradesh, a 343-km segment.

The DFCC has shortlisted two consortiums led by major Japanese infrastructure firms to develop the 640-km-long section between Rewari and Palanpur, a major portion of the western freight corridor stretch.

The final contract will be awarded to the firm selected by the end of this month. We have shortlisted Sojitz corporation L&T and a consortium of Mitsui-IRCON-Leighton. The final bidding will be done this month.

There were issues related to land acquisition, monuments and environment that were delaying the process. Have they been resolved

We have done the best land acquisition that has ever happened in India. We needed to acquire 11,000 hectare linear land spanning 3,300 km. We needed to acquire land in 60 districts of nine states. It has been a massive exercise for the railways. We needed several clearances, including forest land clearances, government land clearances, permission for eco-sensitive zones, clearance from wildlife departments and coastal regulatory zones, Taj trapezium, National Monument authority and the Archeological Survey of India. There were issues, but special steering committees of every state formed for land acquisition for DFCs addressed all such problems. The acquisition was made according to the Railway Amendment Act 2008.

There has been large-scale rehabilitation and resettlement due to the project and there have been reports of opposition from the people. How has DFCC handled it

We will complete the rehabilitation and resettlement of 1 lakh people displaced by land acquisition by the end of this year. We are expecting to complete its compensation process, amounting to R4,217 crore, by the end of this calendar year. Till now a compensation of R3,160 crore has been paid to the people for their land. Of this, around R2,000 crore was given this year only. Eighty percent of the alignment of the western and eastern corridors is parallel to the already existing railway track. For the 20% detour, the land requirement is of 11,000 hectare.

The railways is stressing on green energy. How can DFCs contribute to this initiative

It is a clean energy transportation system. The green house gas emission will be reduced by 477 million tonne of CO2 over a period of 30 years.