Rlys tie up funds for dedicated freight corridor

The railways are likely to secure a loan of Rs 37,200 crore from multilateral institutions, including the World Bank and the Asian Development Bank (ADB). The amount is expected to take care of the construction of about 76 per cent of the proposed 2,739-km dedicated rail freight corridor (DFC).

The project is expected to augment the capacity of railway network to handle the large increase in freight traffic over the coming years. The DFC would enable freight trains to run at 80-90 km per hour, compared with the present speed of 25-30 km per hour.

The Japan International Cooperation Agency (JICA) has already committed a loan of Rs 18,000 crore at an interest rate of 0.2 per cent for funding the 920-km stretch between Rewari and Vadodara on the proposed western dedicated freight corridor. The final agreement between the JICA and the railways is expected in the first quarter of 2009-10.

Meanwhile, the World Bank has given its approval in principle for a loan of Rs 12,000 crore for the 730-km Mughalsarai-Khurja section, while the ADB has shown an interest in lending Rs 7,200 crore to finance the 430-km stretch between Khurja and Ludhiana. Both these stretches fall on the proposed 1,256-km eastern freight corridor between Ludhiana and Howrah.

“The rate of interest at which the World Bank and the ADB will advance these loans is likely to be 5.5 per cent. We have already started the process of negotiations with these institutions and a final agreement will be signed by the end of 2009,” said a senior official of Dedicated Freight Corridor Corporation of India Ltd (DFCCIL).

As part of the World Bank funding programme, DFCCIL has appointed a consortium of consultants which includes Parsons Brinkerhoff India, Halcrow, Wilber Smith and Lee Associates for system design, finalisation of bid documents and supervision of the construction of the 300-km Khurja-Kanpur section on the eastern dedicated freight corridor.

“We have already submitted the draft pre-qualification document for design and build contract to the World Bank. The bidding process for the same is likely to commence by March 2009,” said the DFCCIL official.

Meanwhile, a technical assistance team from the ADB has held consultations with senior members of the Railway Board and DFCCIL. Following this, the ADB has proposed to provide technical assistance for undertaking a feasibility study of the Ludhiana-Khurja section.

A JICA report has estimated the total cost of constructing both western and eastern freight corridors at Rs 37,218 crore.

The debt-equity ratio of the project has been decided at 2:1. The railways will bring in the equity part.

“The commitments from multilateral institutions are a little higher than the estimated requirement. Since the project will be implemented over the next six years, there is always a chance of cost escalation. In such a scenario, it will be easy for them to lend more without going through the approval process,” said the DFCCIL official.