Indian Railways is passing through a tough phase but it is not braking on its ambitious project of putting up dedicated freight corridors. The task has been assigned to Dedicated Freight Corridor Corporation (DFCC), a wholly-owned entity of the ministry of railways. In an interview with Disha Kanwar and Jyoti Mukul, DFCC Managing Director R K Gupta gives an update on the project, even as he says the popular perception of cost escalation in the project is not correct, since new features have been added to the corridors. Edited excerpts:
When is the first stretch of dedicated freight corridor expected to be commissioned?
We are likely to commission a 66-km double line track in the Mughalsarai-Sonnagar section, costing around Rs 850 crore, by December 2014.
Has the funding for the two corridors been tied up fully?
There is a three-way funding for the eastern corridor. The section from Ludhiana to Mughalsarai will be funded by a $2.7-billion World Bank loan, Mughalsarai to Sonnagar is funded by the government of India and Sonnagar to Dankuni will be done on a public-private partnership mode. The World Bank has sanctioned $975 million in May for the Khurja to Kanpur phase. There will be another two tranches of $1.050 billion and then $700 million. The next tranche will get a go-ahead by March 2012. Before that, we have to comply with certain triggers like-acquisition of land and award of civil work contracts in the first phase.
For the western corridor, the Japan International Cooperation Agency (Jica) is providing the funds. It is envisaged that a Special Terms of Economic Partnership Loan of 679 billion yen will be provided by the government of Japan to finance the construction of the western corridor, as well as procurement of locomotives. The loan will be extended on soft terms for 40 years with a moratorium of 10 years. The remaining portion of the cost will be borne by Ministry of Railways in the form of equity to DFCC. The first tranche of the loan for 90.2 billion yen for construction between Rewari and Vadodara has been signed. Another 274 billion yen funding for Phase II (Vadodara-JNPT) is under negotiation and is expected to be finalised by March 2012.
How far has the cost of entire project has risen and why?
The preliminary cost was about Rs 28,000 crore at January 2007 prices but later on, there were a number of additions to the project like junction arrangement (for seamless operation), double track, electrification of the western corridor, which itself added Rs 3,000 crore, increase in width of formation from 12.5 to 13.5 metres for moving wider wagons and higher specifications costing around Rs 2,800 crore. Besides, inflation added another five per cent. Right now, the basic construction cost is around Rs 42,000 crore not because the project cost has escalated but due to addition of certain components. Besides, there will be interest accrual during construction of about Rs 10,000 crore, of which about Rs 3,500 crore would accrue to the World Bank and Rs 6,500 crore to Jica, taking the completion cost to about Rs 78,000 crore. This figure is based on the 2009 price.
Would DFCC look for debt beyond the existing arrangement with multilateral agencies? What has been the expenditure so far and when will interest payments start?
In case equity is not available, we may go for market borrowing. Our interest liability will start coming from next year. Right now, our cost is mainly on land acquisition which is being looked after by Indian Railways. We will require Rs 10,000 crore in 2012-13. As interest will start accruing from April 1, 2012, we will be requiring Rs 14,000-15,000 crore on an average from next year onwards. The loan effectuation of Jica is scheduled from this December. The moment we go for loan effectuation, interest starts accruing.
How far has bidding for various sections has progressed?
For the stretch between Khurja and Kanpur, we are preparing for bidding. For this, pre-qualification has been done. It is awaiting World Bank clearance. About 16 companies are likely to pre-qualify out of 27 companies. As soon as the pre-qualification is over, we will come out with bid documents. This should happen by September. On the western corridor, we will call bids for Rewari to Palanpur (625 km) soon. Pre-qualification has been done and is likely to be finalised. So, we hope that by the end of this year, we will be able to give the contracts.
Will the freight corridors run parallel to the existing lines? Has there been any new alignment due to issues relating to land acquisition?
About 80 per cent of the corridors will run along the existing tracks but there are detours which are unavoidable because in some of the populated areas, like Tundla, Ahmedabad and Surat, we could not go along the existing lines. This is about 303 km.
Has an arrangement with the railways for running service on the corridors been finalised?
DFCC will provide access to Indian Railways. We are not going to own any rolling stock. According to our business plan, we will take track access charges from the railways. It will have two components — fixed and variable. The fixed component will be calculated based on the total project cost, while the variable component will be dependent on the quantum of traffic net tonne per km. But we will work on a no profit-no loss principle. An agreement has been worked out by all the parties concerned.
What will be the arrangement for movement of goods between existing tracks and DFCC? How much additional traffic is likely to move with the creation of freight corridors?
Any traffic going beyond a certain distance will move on the corridor. Short distances will be run on the existing railway lines. By 2017, additional traffic is expected to be 200 million tonne. Within 20 years, traffic will double and we will have the capacity to carry it.
