At one stage, if you could name any current infrastructure project in North India, chances were it was a part of the Delhi Mumbai Industrial Corridor (DMIC) umbrella. But 13 years after it was set up in January 2008 as a special purpose vehicle, the Delhi Mumbai Industrial Corridor Development Corporation Limited, the umbrella seems to have outlived its need.
Also the Corridor is now at the risk of being upstaged by the much more integrated Chennai Bengaluru Industrial Corridor (CBIC), planned much later in 2015.
The problems with DMIC are several. When it was conceived in the high noon of SEZ and PCPIR projects, planners felt these mega industrial causes will draw in large investments. The implementation risks, notably land acquisition, were thoroughly under-focussed.
DMIC added several more problems to the mix. The initial set of promoters changed, the financing plan of the project changed, the name changed and finally the ambition of the government changed. The CBIC has suffered none of these problems.
IL&FS and IDFC which came in as shareholders had to move out as the risks seemed skewed against the state and rewards tilted more towards them. Once they were out, the financial architecture had to be redrawn. Along with GOI at 49 per cent, Japan Bank for International Cooperation (JBIC) came in with 26 per cent, HUDCO at 19.9, IIFCL with 4.1 and LIC with one per cent.
The only agency that possibly retains faith in the DMIC is the Japan Bank for International Cooperation. “We are walking slowly but steadily. We need patience,” said a source in the organisation.
Where CBIC scores
Patience is a virtue with the renamed National Industrial Corridor Development Corporation Limited. There are now eleven such corridors under its belt including DMIC.
Till December last year, the overwhelming expenditure on DMIC was Rs 20,084 crore. But for all the sum spent, not even one project has come on stream. The closest has been a business centre inaugurated by the Prime Minister in September, 2019 in the proposed smart city Shendra in Maharashtra.
CBIC could change the narrative about what makes a successful industrial corridor, soon. On the last day of December 2020, the central government approved equity support of Rs 1,042.46 for the three nodes of the project at Krishnapatnam in Andhra Pradesh, Tumakaru in Karnataka and Ponneri in Tamil Nadu. All the three are swiftly developing as industrial hubs, even before CBIC has got off the ground and cabinet approval will only aid the effort. Government data shows the timelines for the construction of trunk infrastructure in these two nodes is expected to be completed within three years from now.
Krishnapatnam is a deep sea port and is therefore emerging as a favourite port in Eastern India for bulk cargo like coal and cement. Both Tumakaru (originally Tumkur) near Bengaluru, and Ponneri as one of the fastest growing suburbs of Chennai have more distance to catch up, though.
But all of them are far ahead of Dholera in Gujarat, Shendra or Dighi port in Maharashtra, the key nodes for DMIC, as settled urban centres offering scope of plug and play. Since these are already thriving urban settlements the additional land requirements are not too vast. For instance, government data shows the three nodes of the project will need about 185 sq km, mostly in the industrial areas. For instance in Krishnapatnam, plots of 1,814 acres have been transferred to the project SPV. In Tumakuru too, another 1,668 acres of land has been transferred to Project SPV.
In contrast, in the key nodes of DMIC like Dholera Special Investment Region, the entire city has to be built from scratch acquiring land from the farmers. At present the “activated” land at Dholera is about 22.5 sq km. It needs land triple this size for the city to come alive. The requirements of all the other nodes combined are a few thousand square kms. All projects are therefore several steps short of being built or bid out, and because of the delay are possibly out of date.
One example is the approval given in October last year to the Tata group at Dholera for building a 100-Mw solar plant. Just 400 km away, a 30-Gw solar project is coming up at Kutch. Because of the economics of scale, the price of electricity from the Kutch project is going to be far lower than the Rs 2.75 per unit price quoted in the 25 year power purchase agreement signed by Tata Power at Dholera.
For easier financing options, the government had formed a trust to run the bevy of DMIC projects. Initially known as DMIC Project Implementation Trust Fund, it was re-designated as the National Industrial Corridor Development and Implementation Trust (NICDIT). The idea is the trust shall sponsor SPVs to work on the multifarious projects at each site. Each of those projects like roads, water, power, public transport or hospitals shall each be an SPV. They shall be bid out by the National Industrial Corridor Development Corporation Limited for private or public sector companies to come in as joint venture partners. The disaggregated style was meant to side-step government agencies and instead draw in competition within India and abroad to create each of the coordinated and unified industrial corridors.
As the CBIC developments show, there is no need for a government agency to steer such humongous projects any more. Nor is it able to prevent projects from sinking. The Dighi Port project, which was originally bid out to Balaji Infra Projects under Vijay Kalantri entered insolvency proceedings in 2018. Adani Ports has bought it for Rs 705 crore this year. In a statement post the acquisition, in a statement post the acquisition the group said it plans to invest more than Rs 10,000 crore in it including rail and road infrastructure. This could create a strong rival for JNPT. The scale of investment is almost half of what NICDIT has put in for the entire range of corridor projects in one and a half decade.
Equally blighted is possibly the plans for the multi-modal logistics hub and transport hub at Greater Noida, though the cabinet has reaffirmed support to it again. The key financier for the project, Shanghai-based Asian Infrastructure Investment Bank, has asked for multi-stage engagement with the people who will lose land, before going ahead with it. Even as the project report pencils in the last tranche of the $142 million loan to be drawn by September 2023, AIIB has meanwhile asked for an Independent Accountability Mechanism for an impartial review of the submissions from the “project affected people who believe they have been or are likely to be adversely affected”. This is in addition to the environmental and social policy assessment of the project which it says “is expected to generate adverse impacts to the physical and biological environment and the communities, (even though) most of them are limited and localized”. In other words the odds against the project are already stacked.
Unconnected nodes of DMIC:
The worst cut for the DMIC is the rapidly developing 1,350-km-long Delhi–Mumbai Expressway. Its route neither touches Dholera and is far from Shendra. It will, however, connect some of the other nodes like the Dadri Noida Ghaziabad region, the Khushkhera Bhiwadi Neemrana region, the Manesar Bawal region, all in the National Capital Region. But the Expressway will be nowhere near the Pithampur-Dhar-Mhow region in Madhya Pradesh or and the Jodhpur Pali Marwar region in Rajasthan. DMIC is thus missing out on the new growth points. It is also too vast a spread for any one agency to spearhead.
The original ambit of DMIC was simple “By connecting Delhi and Mumbai, through the DFC, we can expect the punctual operation of freights. This is especially necessary for manufacturers to reduce the inventory and realize just in time style operations”, said a Japanese government source. By spreading itself out too thin it has dissipated itself.
The layout of the CBIC corridor meets that promise. It is essentially about developing three industrial zones, with two on the shores with a set of 25 trunk infrastructure projects, identified by the Japan International Cooperation Agency (JICA). Despite what the cabinet note says these are not greenfield industrial cities but lived in ones. This is their advantage because they obviate the land acquisition constraints. It is therefore an easy option where one can offer a plug and play infrastructure with deep road and rail connectivity for freight movement to and from ports and logistic hubs along with reliable power and quality social infrastructure. The web site of NICDC makes a nodding reference to all the eleven corridors but has functional links to only DMIC projects. Not too many officers, it would seem in the department for promotion of internal trade and investment, are also convinced about the eventual success of the biggest of all the eleven corridors.
Table: Financial Statement Summary
Particulars | 2019-20 | 2018-19 |
Total income | 22,52,42,116 | 25,02,19,924 |
Total expenses | 18,46,11,883 | 19,07,01,519 |
Tax expenses | 1,15,83,966 | 1,58,97,020 |
Profit/(Loss) for the year after tax | 2,90,46,267 | 4,36,21,385 |