The initial investment envisaged by RITES Ltd in its feasibility study report submitted in 2006 was Rs 28,181 crore for constructing nearly 2,762-km-long rail corridor. However, the project cost has now gone up by a staggering 40 per cent.
The prices of steel have increased by 77 per cent from Rs 26,951 per tonne in 2006 to Rs 47,800 per tonne in 2008. Similarly, the prices of cement rose by 44 per cent, from Rs 163 to Rs 235 per 50-kg bag. These two commodities together constitutes nearly 40 per cent of the total input cost of the project.
Kuljeet Singh, partner, Ernst & Young, said: "This is not an unusual thing. It is happening across the sectors. But when it comes to government-funded project, the initial study report may ignore the future inflation or may incorporate a nominal 3 to 4 per cent inflation level. With this kind of cost escalation, the financing stream will have to be expanded. And getting a proper funding system in place in time will be quite challenging for the railways."
A senior official at DFCCIL said, "The proposal to electrify the western corridor route comprising 1,483 km from JNPT to Dadri alone has put an additional burden of nearly Rs 2,000 crore on us. But we are confident of raising sufficient amount from various multilateral agencies."
The Indian Railways are still negotiating with Japan International Cooperation Agency (JICA), which had shown interest in financing a portion of the 700-km route between Rewari and Baroda on the western corridor.
More From This Section
For the remaining portion of the eastern and western corridors, the committee constituted by the World Bank to conduct a financial feasibility study had finished its task and submitted its report to the World Bank.
"A World Bank team is coming to India during mid-July to hold further discussions on the project with senior railway and DFCCIL officials," said a senior railway ministry official.