DFCC optimistic of $650-mn funding for freight corridor

Hectic negotiations are currently on among the Dedicated Freight Corridor Corporation (DFCC), Department of Economic Affairs (DEA) and the World Bank for a $650-million funding for a Rs 80,000-crore rail freight corridor project.

The soft loan would be used to construct a 400-kilometre, single-line electrified corridor between Ludhiana in Punjab and Khurja in Uttar Pradesh as part of the third tranche of the World Bank funding for the eastern arm of the project.

Asked about the interest rate being sought by DFCC, a senior executive of the corporation said the World Bank funding in the two earlier phases was secured at 0.7 per cent plus London Interbank Offered Rate (Libor), the benchmark rate that some of the world's leading banks charge each other for short-term loans. "We are hopeful of securing the loan. The negotiations will be finalised by November," he said.

The dedicated freight corridor has arisen because the existing Howrah-Delhi on the eastern corridor and Mumbai-Delhi on the western corridor of the Golden Quadrilaterial are highly saturated creating the need for dedicated routes. The Golden Quadrilateral linking Delhi, Mumbai, Chennai and Howrah - and its two diagonals Delhi-Chennai and Mumbai-Howrah - accounts for only 18 per cent of the Indian Railways' network but carries more than 58 per cent of revenue earning freight traffic.

DFCC is currently constructing a 3,350-kilometre-long freight corridor, of which 1,800 km is part of the eastern arm between Ludhiana and Dankuni in West Bengal. This arm will be completed over three phases - Ludhiana to Mughalsarai, Mughalsarai to Sonnagar and Sonnagar to Dankuni. The project, when commissioned in 2019, is expected to take up more than 70 per cent of the Indian Railways freight traffic on faster, longer and heavier trains.

The eastern corridor accounts for around 40 per cent of the total project cost. Phase I of the project between Khurja and Mughalsarai is being funded through 66 per cent debt from the World Bank with the rest as equity from the rail ministry. The Phase II corridor between Mughalsarai and Sonnagar is being funded entirely through government equity, while the third phase between Sonnagar and Dankuni is to be developed on PPP mode.

The World Bank is providing International Bank for Reconstruction and Development loan of $2.725 billion for funding the Ludhiana-Khurja-Kanpur-Mughalsarai corridor in three phases. The loan of $975 million for the first phase was approved for the Khurja-Kanpur section in 2011 and $1.1 billion for Kanpur-Mughalsarai in December 2014. Negotiations are on for the remaining $650 million funding for the third phase.

The western corridor is being funded by the Japan International Cooperation Agency, the Japanese government's funding arm. It is providing a Special Terms of Economic Partnership loan of 677 billion Yen on soft terms for 40 years with a moratorium of 10 years. The first tranche for 90.2 billion Yen for construction between Rewari and Vadodara and 266 billion Yen for Phase II (Vadodara-JNPT) has been signed.