Target 2020: DFC project approaches completion deadline

DFC project approaches completion deadline

With an investment of more than Rs 800 billion, the Dedicated Freight Corridor (DFC) project is one of the largest ongoing infrastructure projects in the country. Till recently, progress under the project was slow due to issues pertaining to financing, land acquisition, and coordination and monitoring. However, the Indian Railways (IR) has now started making progress on the project. At present, land acquisition is almost complete, except for the Dankuni-Sonenagar section of the Eastern DFC. Besides, IR has also taken a big step forward by carrying out the first trial run of an IR locomotive on the Ateli-Phulera section of the Western DFC.

Scope and progress

Under the project, six high capacity freight corridors are to be developed along the Golden Quadrilateral highway network and its diagonals. As a part of Phase I of the project, work on two corridors – the Eastern and Western DFCs – was initiated in 2008 and are currently at various stages of development. As of January 2018, 98.8 per cent of the land has been acquired for the Western DFC by Dedicated Freight Corridor Corporation of India Limited (DFCCIL), a special purpose vehicle set up under the Ministry of Railways to undertake planning and development, mobilisation of financial resources, and construction, maintenance and operation of the DFCs. As of January 2018, 97.1 per cent of the land has been acquired by DFCCIL for the Eastern corridor excluding the Dankuni-Sonenagar section, for which only 67.8 per cent of the land has been acquired.

About Rs 140 billion worth of contracts were awarded by DFCCIL in 2016-17. Other major civil works contracts, valued at Rs 132 billion, were also awarded in 2017 (until May 2017). The highest contract ticket size between May 2016 and May 2017 was a Rs 47.43 billion contract for civil, building and track works in the Iqbalgarh-Vadodara section of the DFC.

For the current fiscal year (2018-19), 2,819 km of the DFC network has been targeted for commissioning. Recently, successful trial runs were conducted on the 190 km Ateli-Phulera section of the Western DFC. Besides, Larsen & Toubro was awarded the engineering, procurement and construction contract for the project to undertake civil, structural and track works on the single-track corridor from Khurja to Pilkhani (Eastern DFC), for which construction work has already started.

Further, Union Budget 2018-19 has made provisions for the procurement of 12,000 wagons, 5,160 coaches and 700 locomotives for the Eastern and Western DFCs during the year.

Investment requirements

The DFC project is expected to entail an investment of Rs 814.59 billion with most of the funds to be sourced through the government’s budgetary allocations and from donor agency funds through soft loans. A small part of the total fund requirement will be mobilised from the private sector by way of public-private partnerships (PPPs). For instance, the Dankuni-Sonenagar section on the Eastern corridor is being implemented through a PPP.

The debt-equity ratio for capital expenditure is 3:1, with debt coming in the form of loans from agencies such as the Japan International Cooperation Agency (JICA) and the World Bank. JICA is providing funds (Rs 387.22 billion) for the Western corridor, while the World Bank is investing in the Eastern corridor (Rs 177.16 billion). As of January 2018, financial progress of 37.1 per cent was achieved. The estimated investment required up to end-2018-19 (by when the Eastern and Western corridor are expected to be commissioned) is around Rs 355 billion, if there is no further cost escalation.

Upcoming opportunities

Besides the Eastern and Western DFCs, three other corridors – the East-West Corridor (2,328 km) (Kolkata-Mumbai); the North-South Corridor (2,327 km) (Delhi-Chennai); and the East Coast Corridor (1,115 km) (Kharagpur-Vijayawada) – have been announced. These corridors span a network length of 5,700 km and entail an investment of over $55 billion. These corridors are expected to offer significant opportunities to various market players including contractors, consultants, equipment and vehicle providers, and technology providers. Currently, the preliminary engineering-cum-traffic survey reports of these corridors have been completed.

Going forward, the DFC project could be a turning point in the freight transportation segment. It will lead to a huge increase in IR’s transportation capacity, increase port connectivity, improve transport infrastructure and reduce inventory costs. However, to ensure the success of the project and to maximise benefits, DFCCIL will need to address issues pertaining to financing, land acquisition, and coordination and monitoring.