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Delhi-Mumbai Industrial Corridor: A tale of abandonments and delays

Almost a decade after its launch, the project faces big challenges

Sai Manish 

DMIC
The Pithampur-Dhar-Mhow stretch of the Delhi-Mumbai Industrial Corridor, in Madhya Pradesh. Photo: Official website

The good first. Almost a decade after the Manmohan Singh government announced the $90-billion (Rs 6-lakh-crore) Delhi-Mumbai Industrial Corridor (DMIC), men and machines have started picking up pace in some of the eight investment regions across the six states touched by the project.

The order books of India’s infrastructure behemoths have started swelling. Larsen & Toubro (L&T) has orders worth Rs 3,230 crore in Gujarat, Maharashtra and Madhya Pradesh. Shapoorji Pallonji’s contract basket has hit Rs 1,212 crore after bagging three projects in Maharashtra and Uttar Pradesh. Smaller ones like Subhash Projects and Marketing Limited (SPML) are catching up with orders worth Rs 422 crore in and Madhya Pradesh. Among the projects, these companies will execute are trunk infrastructure facilities, administrative buildings, sewage plants and water treatment facilities. The government, too, is pumping more money than before. Nirmala Sitharaman, commerce & industry minister then, had said during the Budget session of Parliament that almost Rs 500 crore was given to DMIC in 2016-17. During the first two years of its rule, the Modi government had given only Rs 50 crore rupees to the project in each year.

Now, the bad part. The wheels of progress for the ambitious project have moved at a snail’s pace – most of the corridor is still plagued by acquisition issues, many big-ticket projects’ detailed reports have only recently been approved a decade after their conception, big power projects envisaged in the corridor have been abandoned, and if not for the Japanese, the project wouldn’t have had shown even the modicum of momentum that has been visible over the last couple of years.

Abandoned power plants

Nothing exemplifies the DMIC conundrum better than a decision taken by its board on November 16, 2016 to return to respective state governments for gas fired power plants that were abandoned due to unviability. These 1000 megawatt (MW) power plants were to be set-up at Guna in Madhya Pradesh, Ville Bhagad and Indapur in Maharashtra and Vaghel in  A former petroleum ministry official told Business Standard, “High level discussions were held for approval of these power plants and adequate gas supply arrangements were made. There was a lot of activity and excitement around these power plants.”  DMIC Development Corporation had even obtained clearance from Airport Authority of India (AAI) for the height of the chimneys of the power plant. More than 350 hectares of had been allotted by respective state governments for these plants after obtaining environmental clearances and holding public consultations. DMIC Development Corporation had signed a gas purchase agreement with Gas India Limited (GAIL) and proposals for the same were cleared by the petroleum ministry. According to DMIC Development Corporation, the entire process of ensuring gas supply was being monitored by the Prime Minister’s office. But in November 2016 the decision was taken to abandon the power plants due to difficulties in procuring gas. Financial statements of these power plants presented before the Parliament stated, “After the development of projects and allotment of lands for the same the overall output in gas has fallen consequent to which availability of gas became difficult affecting the development of power projects.  DMIC Development Corporation had tried to structure these projects on imported Liquefied Natural Gas (LNG) after blending with domestic gas. On account of non-viability of the project at high prices of imported gas and in the absence of any policy framework regarding fuel pass through, it was extremely difficult to secure a power purchase agreement at those price inputs. In view of these developments the board in its meeting on November 16, 2016, has decided to return the to the state governments. The companies name will be struck off from records after receipts of refund from the state governments.”  Questions sent to DMIC Development Corporation CEO Alkesh Sharma did not evince a response till the time of publication.

With a little help from Japan

While these gas powered projects never saw the light of the day, the Japanese Zone at Neemrana, a two-hour drive from capital Delhi, witnessed the first successful completion of a project envisaged under DMIC. By the look of it, this 5 MW solar power plant is also the only project that has been completed till date. The plant commissioned in 2015, was developed in collaboration with New Energy and Industrial Technology Development Organisation (NEDO), Japan. According to company documents, the performance of this plant has been rather phenomenal with a capacity utilization factor of around 17%, impressive for a plant in Neemrana where the availability of sunshine is on the higher side. The power from the plant is being bought by the Rajasthan government for 8.77 rupees per unit – that’s almost four times the solar power tariff reported in May this year. In fact solar power in India is now being reported to be at its lowest in years. Another 1 MW micro solar plant being constructed by the Japanese at Neemrana has even higher tariffs. The power is supplied from this to the grid would be priced at almost 12 rupees per unit. With guaranteed tariffs well above the present depressed market rates, in two years of its operation, the solar power plant has doubled its revenue to Rs 6 crore in 2016-17. Other Japanese companies like Hitachi and Sharp provided equipment for the solar plants. The Japanese are also investing massively in infrastructure across regions in DMIC especially The entry of the Japanese in DMIC Development Corporation was facilitated by the exit of Infrastructure Leasing & Finance Company (IL&FS) in 2012. IL&FS was the second largest shareholder in DMIC Development Corporation since its incorporation in 2009. Documents show that one of IL&FS representatives who was listed as a nominee shareholder was Pradeep Puri, the brother of ex-diplomat Hardeep Puri, recently appointed by PM Modi as the minister of state for housing and urban affairs. IL&FS exit from the consortium meant that Japan Bank for International Cooperation (JBIC) came on board with a 26% shareholding. With JBIC on board, Japanese companies too seem to have taken interest in the project. The India-Japan business summit in 2016 was rife with reports of Japanese businesses keen on investing close to $10 billion in DMIC.

The acquisition imbroglio in Gujarat

While the Japanese are keen on DMIC, the project has been bogged down by acquisition problems and delays in various investment regions. The most prominent among these is Dholera, the ancient port city which the Modi government wants to convert into a smart city. Company documents show that the process of acquisition has been fraught with delays even though a single party government has been in power in the state since 2009 when acquisition process for the Ahmedabad-Dholera special investment region began.  In 2011, the government transferred 279.23 square kilometers of to the regional development authority for implementing the first phase of the project. In 2012, the government moved to a pooling strategy under which the entire investment region of around 920 square kilometers was divided into six town planning schemes. In 2015, the government transferred another 11.79 square kilometers of for the project.  But in December 2015, the government’s acquisition was stayed by the High Court after a petition filed by a local farmers body comprising of representatives of villages near Dholera. While the matter is still sub-judice, the fate of the Dholera-Ahmedabad special investment region now rests on how farmers can be persuaded to part with their agriculture without wasting more time in courts. The government’s dilemma is this: it has been able to give only 290 square kilometers of for the project but DMIC needs more than 900 square kilometers of it. Even if the project were to be implemented in six phases as is being planned, would need to get the to ensure development doesn’t happen in isolated patches without any inter-linkages to surrounding areas. DMIC justifies this approach in its project brochure saying, “Since the entire trunk infrastructure cannot be implemented in a one go, a phased approach has been adopted and an activation area of 22.5 sq. Km has been identified which would act as catalyst for further investments and will provide a base for taking up development of further phases. The activation area is envisaged to trigger developmental activities in Dholera Special Investment Region and attract local and global investments. The area shall also help build confidence in the market for attracting anchor tenants thereby paving the way for development of remaining part of Dholera Special Investment Region.”

The corridor’s weak nodes

While acquisition has run into legal hurdles in Gujarat, it is evident in less subtle ways in some of the other manufacturing cities or investment zones planned in DMIC. Take the case of Dighi Port Industrial Zone in Maharashtra, the starting or terminating point by the sea in the DMIC project. While the DMIC Development Corporation had estimated 253 square kilometers of available for development in the region, only 22.55 square kilometers have been acquired till date. According to its financial statements laid before Parliament, even the parcels which has been acquired is not contiguous and “project development activities will be initiated only once the contiguous is made available by the state government,” In other investment zones, things have moved at a snail’s pace over the years. For instance, a concept master plan for Manesar-Bawal investment region in Haryana was prepared by the project consultant in 2010 and subsequently revised the following year after recommendations were given by the then Bhupinder Hooda led Congress state government. In April 2012, a meeting chaired by Hooda decided to notify the master plan at the earliest. However, the master plan was approved only sometime in 2015-16 by the Manohar Khattar led BJP government. Similarly, a Mass Rapid Transport System (MRTS) to connect Gurugram (then Gurgaon) to Bawal was envisaged in 2010. The detailed project report was approved in 2016-17. According to DMIC, the state government is in possession of a part of the for the MRTS while the remaining portion till Bawal is under acquisition. The integrated multi-modal logistics hub which was planned in Rewari in 2010 was planned as an early bird project. Till date, in three villages has been identified for setting up this project and the acquisition process is yet to begin.

No signal, no freight train

DMIC’s success in many ways is tied to the completion of the 1504 kilometer long Western Dedicated Freight Corridor being executed by the Indian Railways. Like the DMIC, the Western Dedicated Freight Corridor has seen excruciatingly slow progress since the Manmohan Singh cabinet gave its approval in 2008. The first civil contract for construction of rail tracks and signaling was given only in 2013. According to Dedicated Freight Corridor Corporation of India documents, contracts for 41% of the 1504 kilometer railway line were given in 2015-16. These contracts are worth over 9,000 crore rupees. Contracts for 12 bridges over Yamuna, Hindon, Narmada and other smaller rivers in were also given only in 2015-16 and are estimated to be worth over 1,000 crore rupees. All of this has to be completed by October 2019, the revised deadline of the entire Western Dedicated Freight Corridor. But a look at other contracts awarded shows that the corridor may not be ready by 2019 however hard the Modi government pushes it.  The contract for design and construction of signaling and telecom works between Rewari and Vadadodra – a 974 kilometer stretch comprising almost two-thirds of the entire corridor commenced in January 2016. The deadline for finishing the work is 338 weeks or 6.5 years. Even if the railways goes full steam ahead and finishes construction of railway tracks on this corridor by 2019, the all-important signaling and telecommunications will be operational only in the latter half of 2022. And unless the contractor carrying out the signaling work finishes it three years ahead of schedule (a highly unlikely scenario given the railways track-record), railway tracks and freight trains wouldn’t be able to use the corridor atleast till 2022. And this is not good for DMIC.  

Even as work on DMIC has only started picking up momentum in the last couple of years, the Modi administration has sought to dilute the focus on this corridor. The Delhi-Mumbai Industrial Corridor Project Implementation Trust Fund through which Rs 17,500 crore was to be injected into DMIC has now been re-constituted to cater to four other such corridors planned across India. In March 2017, the DMIC Project Implementation Trust was rechristened as the National Industrial Corridor Development and Implementation Trust. Whereas, the government had sanctioned Rs 495 crore to DMIC alone in 2016-17, it has sanctioned just about double the amount of Rs 1,030 crore to the new trust. Earlier, the money was meant only for DMIC. Now the money would have to be shared with four other such planned corridors across India. With DMIC struggling to show results, the Modi government seems to have decided to put its eggs in other baskets. The difference between master plans on the drawing board and progress on the ground indicates that the chickens may come home to roost much earlier than the government expected. 
 

First Published: Thu, October 05 2017. 13:11 IST
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