News analysis
Y December, India will award the first civil engineering contract, worth approximately Rs 100bn ($US 1.8bn), to build 2200 track-km for implementing the 3338km Dedicated Freight Corridors (DFCs) on the country’s eastern and western flanks. Of the 9701 hectares of land required for the project, 7217 hectares (74%) has been acquired.
The growing pains of India’s freight corridors B
Raghav Thakur Correspondent
at Rs 960bn. As part of the cost-cutting
The first tranche of loans, comprising $US 975m from the World Bank and $US 5.2bn from the Japan International Cooperation Agency (JICA), has been received and the agreement for the remaining amount will be signed by 2013. India’s ambitious rail infrastructure project, it seems, is about to take off. But on the flip side, the DFCs have been plagued by delays and cost overruns. In the five years since its conception, the total project cost has surged from Rs 420bn as initially proposed. After a huge cost-cutting exercise, the budget has now been pegged
measures, the project is now being implemented on the basis of a traffic projection for the 10 years from the date of completion. The overall project design has not been amended, but there have been changes in scope - for example, the number of loops has been reduced from four to just two. The Dedicated Freight Corridor Company (DFCC) insists that anything cut at this stage can still be implemented in the second phase. Other compromises have also been made. Owing to political uncertainties and procedural and bureaucratic wrangles over project implementation, the private sector has been reluctant to invest. Project funding has therefore come only from the World Bank and JICA. With these constraints on
the project budget, India’s ability to leverage the project to extract the best rates for services offered has now become limited. Loans from the World Bank and JICA have come at low interest rates, but analysts say the terms and
conditions attached to these agreements are heavily loaded. Such apprehensions are not unfounded. For the JICA-funded Western DFC (1499km), just two joint ventures have been shortlisted for the civil works contracts, and Japanese firms Mitsui and Sotitz are the lead partners of both consortia. On the World Bank-funded Eastern DFC, the work looks likely to be more evenly split, with Russian, Spanish, Chinese, American and French firms in the fray. But even here concerns have been raised about the limited number of bidders - only 13 companies have been shortlisted, far fewer than expected.
The other issue concerns the slow progress in developing connecting lines along the Delhi - Mumbai Industrial Corridor (DMIC) - which plans to develop seven major industrial hubs along a 150km stretch either side of the Western DFC. Five years after the plan was conceived, Indian Railways has not completed surveys on proposals to construct three new lines totaling 191km. Progress on
the links between the DFCs and ports has also been frustratingly slow due to a paucity of funds.
Notwithstanding all this, the outlook for India’s quest to create a dedicated freight network actually looks fairly positive. The country’s existing 64,000km network is extremely congested and there is near unanimity among politicians that the DFC project must move forward. By the end of March 2013, civil works are scheduled to begin on two stretches: the 350km section from Khurja to Kanpur on the Eastern Corridor and the 650km-long Rewari - Palampur section of the Western Corridor. Financial tenders for the Western Corridor will be opened on October 30. Technical bids for the Eastern Corridor are presently being evaluated by the World Bank. With infrastructure designed for 32.5-tonne axleloads, and 15,000-tonne trains, the DFCs will provide a step-change in freight capacity and bring much-needed relief to some of the most congested parts of India’s railway network. IRJ
N the world of European railway policy, it’s fair to say things usually move along quite slowly. The complexity of drawing up and enacting legislation involving many institutions in many countries means progress, or often the lack of it, is measured over years rather than days. In this lumbering narrative, September 6 was notable for its burst of activity. In Luxembourg, the European Court of Justice Advocate General Mr Niilo Jääskinen dealt a blow to the infringement action brought by the European Commission (EC) against Germany and Austria by recommending to the judges of the court that European Directive 91/440
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EU and member states still at odds over rail policy I
Keith Barrow Associate editor
does not require institutional separation of the incumbent operator from the infrastructure manager (IM). The court is likely to uphold this verdict and dismiss the action, a key endorsement for those member states which have stuck with the holding company structure and are unwilling to relinquish it. Meanwhile, in Brussels, transport commissioner Mr Siim Kallas told delegates attending a conference on the future of European rail policy at the European Economic and Social Committee (EESC) that “the rail sector cannot develop within national borders with member states protecting what they perceived as their national champions.” Kallas warned that if the sector “does not rid itself of protectionist attitudes,” a
single European railway area will not develop. “Twenty years after the 1992 deadline for the completion of the internal market set by the Delors commission, we are far from having a single European railway area,” he says. Victory in the European Court is likely to give Germany confidence it can win the fight to retain the right to an integrated structure in the longer term. Other member states which employ a similar model, notably Italy, will also be buoyed by events in Luxembourg. In France, proponents of reuniting French National Railways (SNCF) with French Railway Networks (RFF) will see it as an endorsement. But does this mean Germany and German Rail (DB) have won the argument
in favour of integration? Until now, liberalisation has seemed destined ultimately to require full separation in all member states. The notion that incumbent operator and IM should be mutually independent of one another has been successfully challenged, and assuming the judges accept Jääskinen’s recommendations, will soon have legal precedent. The EC will argue that this issue needs to be addressed as part of the forthcoming Fourth Railway Package, which will seek to remove the remaining obstacles to market access and will call for unbundling of infrastructure from operations. But perhaps commissioners should pause to consider whether full separation really is essential to fostering competition, efficiency, and
IRJ October 2012
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