Japan disinterest puts freight corridor bids on slow track

Written by Rajat Arora | New Delhi | Updated: Apr 17 2014, 10:51am hrs
INDIAS ambitious dedicated freight corridor (DFC) project is lurching from one hurdle to another, as Japanese infrastructure firms enjoying exclusivity in bidding for several projects develop cold feet, reports Rajat Arora in New Delhi.

Almost a year after Indian Railways invited bids for the R2,000-crore Vadodara-Sachin segment of the western corridor and after the deadline for placing the bids was extended five times, the national transporter could not ensure multiple bids for the stretch. And the railways, sources said, is now putting pressure on the finance ministry to renegotiate the terms of the tied loan for the western corridor from Japan International Cooperation Agency (JICA) so that non-Japanese bidders could also be allowed to participate.

As per the JICA loan contract, the lead partner for any project has to be from Japan and 30% of materials should be sourced from Japanese companies.

Although Indian joint ventures in which a Japanese firm has 10% stake will be treated as a Japanese company, for this purpose, but there are few such players.

Analysts said Japanese' companies disinterest is because of their inability to take up many large projects at a time, and the fact that there are only three-four Japanese players in this area.

DFC's eastern segment is part-funded by World Bank and the Railways is free to call global bids.

Sources said although four consortia Fujita-IVRCL, Sojitz-L&T, Mitsui-IRCON and Marubeni- Tata- KEC-Gammon-GMR have been qualified for the 163-km Vadodara-Sachin project, none of them has since shown interest in bidding for the same. The railways has now set a deadline of June 2 for placing bids.

Last year too, the award of 322-km-long Iqbalgarh-Vadodara route of the western corridor had got delayed due to lack of bidder interest. A senior railway delegation visited Japan to take up the matter with Japanese authorities. Subsequently, Sojitz and Mitsui came in, and the project is now to be awarded in June.

There are only three-four serious Japanese players bidding for several slices of the 1,483 km western corridor from Dadri to Jawaharlal Nehru Port Trust (JNPT). Their capacity is also getting exhausted as the projects seem to too big for them to tackle. We need more companies to participate, said a senior railway ministry official. The national transporter has already awarded a 640 km stretch between Rewari and Palanpur in the western corridor to a consortium of L&T and Sojitz for civil construction. The size of the contract is Rs 6,700 crore. Remaining portions of the corridor are being bid out apiece.

Japan has given a soft loan of Rs 38,000 crore for the western corridor to India to be repaid over a period of 40 years. The railways has acquired 95% of the 11,000-hectare land required for the 3,300-km DFC, which entails a total investment of over Rs 80,000 crore