Railways gets $245-mn World Bank loan to cut logistics project's emissions

Bid to help India reduce emissions through logistics project

The World Bank on Thursday approved a $245-million loan for the rail logistics project to help reduce India’s high carbon emissions and low modal freight share in the railways.

“The project will help India shift more traffic from road to rail, making transport — both freight and passenger — more efficient, and reduce millions of tonnes of greenhouse gas emissions (GHG) each year. The project will also incentivise more private sector investment in the sector,” the multilateral financial institution said.

The loan, financed through the International Bank for Reconstruction and Development, has a maturity of 22 years, including a grace period of seven years. 

The loan will see payment to the Dedicated Freight Corridor Corporation of India (DFCCI). “The amount is the fourth and final tranche of payment for the Eastern Dedicated Freight Corridor (EDFC), which is being partly funded by the World Bank,” said Amitabh Sharma, executive director at the ministry of railways. The corridor is partly operational and likely to be completed by June 2023.

“The project will also support institutional capacity strengthening of the DFCCI as a commercial organisation and equip it to provide multimodal logistics services,” the World Bank's statement said.

Road freight is the largest contributor to GHG emissions, accounting for about 95 per cent of emissions of the freight sector, World Bank said. It found that trucks also accounted for 12.3 per cent of road accidents and 15.8 per cent of total transport-related deaths in 2018. With carbon emissions from railways being a fifth of road transport, the achievement of net-zero carbon emission by the national transporter can eliminate 7.5 million tonne (mt) of carbon dioxide of GHG each year.

India has been aggressively pushing for a modal shift in logistics, in a bid to revive the once-preferred goods transporter. Apart from environmental concerns on account of carbon emissions via road transport, the excessive reliance on road transport leads to congestion on road networks, leading to delays and added cost of logistics. While railways is 45 per cent cheaper, it is not preferred by manufacturers or distributors due to adverse rake booking policies and lack of inter-modal connectivity, a government report had observed.

The rail logistics project is expected to link several infrastructure projects in the country for seamless inter-modal connectivity, augment rail capacity, and bring in private sector efficiency. 

Railways has already begun its foray into public private participation on the EDFC, with a stretch between Sonnagar in Bihar and Dankuni in West Bengal being developed through the mode. Business Standard had previously reported that the national transporter is also looking to engage the private sector more through Infrastructure Investment Trusts (InvITs).