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The Indian Government is all set to give Rs 20,000 crore worth of orders on behalf of the Dedicated Freight Corridor (DFC) which is to be commissioned by 2019. This is good news for L&T, GMR, and GVK and other construction companies. Indian Railways is setting up the project aimed to supplement the rail transport capacity with a project cost of over Rs 80,000 crore.
Here is an update on the issues which slowed down the mega project:
Here is an update on the issues which slowed down the mega project:
Land Acquisition: Like any other infrastructure projects, there are stretches of land that have been difficult to acquire for the government.For example, the western corridor of DFC was to pass through Panvel and then proceed towards Jawaharlal Nehru Port Trust (JNPT). But acquiring land for DFC has been difficult at Panvel where several other projects are also converging like proposed CST-Panvel fast corridor, upcoming airport at Navi Mumbai, suburban sections on the Virar- Vasai-Diva-Panvel line and finally, construction of the Panvel Coaching complex. The DFC authorities have now requested for additional land from CIDCO.
Management change: Frequent management changes and availability of adequate resources at the mid level have been a bane for DFC till date. “The company continues to suffer lack of institutional strength as a result of non-availability of adequate resources at the middle level. The post of all the directors and MDs constituting the functional board has been short of its strength since 2011 continuously and in absence of full strength of functional directors, various roles are already clubbed, which is affecting smooth functioning of the company,” confesses the annual report of DFC.
Not enough bidders: Given the conditions set by the Japanese government (which is giving soft loans) and which stipulates involvement of a Japanese partner, the total number of bidders has been low for the Western corridor. This has twin impact as cost will be higher and delays in award of orders, given final bids have only two players (in most recent cases). Of this, even if one backs out, then the entire bid process is put to jeopardy.
Cancelled tender: A tender for design and construction of civil, building and track work for a 102-km-long double railway line in JNPT-Vaitran section in Maharashtra was recently cancelled (Sojitz-L&T and Mitsui-IRCON were the qualified bidders) and fresh bids have been floated. The pre-qualification process for this package was originally initiated during November 2013 and was to be awarded in FY2015. Cancellation of a tender and iterating the process again have a ripple effect on the overall advancement of the project, says a Kotak analyst.
Slow orders: The DFC has recently awarded two big orders to GMR and L&T consortiums. The contract value at Rs 5,080 crore to GMR while L&T-Sojitz was awarded electrification works for the 915-km stretch. More than 40% of the ordering will be imported Japanese products – substation equipment, electric wires and other equipment for railway electrification. After a long lull, the government plans to give orders worth Rs 20,000 crore. This could be good news for the Indian companies as long as the orders are not delayed like earlier.
