DFCCIL moots de-risked pvt participation for developing freight corridors

Likely bidders are worried a lower demand for coal in the future, as more renewable projects come up, can hamper viability of freight operations on section of Eastern Corridor

The Dedicated Freight Corridor Corporation of India (DFCCIL) has proposed de-risking the private concessionaire that develops the Sonnagar (New Chirailapauthu) to Andal section of the Eastern Dedicated Freight Corridor (DFC). DFCCIL intends to develop this portion of the DFC through a Design, Finance, Build, Operate and Maintain & Transfer (DFBOT) model on Public Private Participation (PPP) basis.

“Private players said they were skeptical of the projected traffic at the proposed section of the freight corridor over the 30 year contract period,” said R K Jain, Managing Director at DFCCIL.

“To address this issue, the Indian Railways and DFCCIL shall take over the traffic and tariff risk which will largely reduce the quantum of risk on the part of the Concessionaire. The Concessionaire shall be responsible for Design, Construction, Finance and Operations and Maintenance of the project,” Jain added.

This section is expected to serve major power houses, industrial corridors and Multi-Modal Logistics Parks (MMLPs) in Haryana, Punjab, Delhi, and Uttar Pradesh. “Increasing trends in finished steel consumption and production will drive growth of steel traffic on the route. Further, to attract more traffic and achieve targeted rail share of freight, DFCCIL plans to develop MMLPs, sidings and feeder routes for last mile connectivity along the section alignment,” an official statement said.

DFCCIL has been holding consultations with private players on how to go ahead with the project. Probable bidders are worried that a lower demand for coal in the future, as more renewable energy projects come up, can hamper viability of freight operations on this route. Another concern is that since train operations are ultimately a prerogative of the railways, there could be lesser number of trains on the freight corridor in a bid to cut costs. A third concern that was flagged was of a possible alternative route, like a parallel road route that could eat into rail freight traffic.

“It is being proposed that the concessionaire will be paid a fixed amount for operation and maintenance (O&M) charges irrespective of the amount of traffic on the route. The bidders will compete on the amount of money sought in return for their services,” Jain told Business Standard.

Currently, annual O&M charges on the freight corridor vary between 10 to 20 per cent of the total project cost.

“It will be the concessionaire’s responsibility to ensure uptime of 20 hours per day. They will be free to hire manpower at their own terms,” he added.

In another bid to sweeten the deal for the prospective bidders, DFCCIL will be investing 25 per cent of the Rs 12,000 crores estimated cost of the project as equity. This lowers the cost to the concessionaire.

These proposals will be floated for further consultation after which they will be vetted by the Railway Ministry and DFCCIL. They will then be sent to the Union Cabinet for a nod, after which the bids will be called. DFCCIL officials expect these approvals to come by December 2021 and bids to be opened by March 2021.