Eastern Freight Corridor cut short; major project runs into land hurdles

The Eastern arm of DFCCIL's Dedicated Freight Corridor has been cut short by 538 km, leaving a key segment unfinished due to land acquisition issues and weakening economic viability

Almost twenty years after being conceived in 2004, the eastern arm of the Dedicated Freight Corridor Corporation of India (DFCCIL) has terminated 538 km short of the Kolkata port.

In terms of actual investment, at about Rs 21,500 crore, this has been one of the costliest infrastructure projects in India to have run aground. The line was to run from Sahnewal in Punjab, close to Ludhiana, to Dankuni, the railhead near Kolkata port. The distance was 1,875 km when it was planned. It is now truncated to 1,337 km, shortening the distance by almost 29 per cent.

The challenge is the old nemesis of infrastructure projects in India—land acquisition. The western leg of the project has also faced the same challenge but is likely to end better. The last stretch of 102 km on the western leg, cutting through the suburbs of Mumbai to JNPT, had been stalled for some years. The segment cuts through dense habitations as it circumnavigates Mumbai to reach JNPT. 

“The project section in the state has seen physical progress of 50 per cent so far and is likely to be completed by December 2025,” DFCCIL managing director RK Jain told Business Standard in July this year. The date is a pushback of another year, from the commissioning date of December 2024 that the Railways was working on.

Weakening economic rationale

There is, however, no likelihood that the eastern leg will see any such luck. The missing link, close to one-third of the project length, has been shelved. This segment of the corridor was financed by three World Bank loans, with the first approved in 2011. The Ministry of Railways provided equity support of Rs 3,679 crore as seed capital. The long delay has also meant the commercial viability of the two corridors, especially the Eastern DFC, is now doubtful, except for coal. Mails and phone calls from Business Standard to DFCCIL did not elicit any response.

When conceived, the Eastern DFC was planned as the line to transport coal from the mineral belts of Jharkhand, Odisha, and Chhattisgarh to the thermal plants of North India, up to Punjab. Coal transportation is the key cargo business of the Railways, accounting for 40 per cent of its total freight revenue. Yet delays in the transport of coal have been a cause for alarm almost every season, every year.

Those delays were a result of the Railways trying to run freight and passenger trains on the same tracks in the Gangetic plains. The completed DFCCIL was meant to cut down those delays sharply. Even now, with the curtailed rail route, the average transit time for coal from mines to these power stations has almost halved from 35 hours to an average of 20 hours. 

“Much more could have been extracted if the linkages were in place,” said a former railway official. Since Sonnagar is no major town or commercial centre, it is like terminating the project abruptly, the official added. Having waited for a long time for the rail corridor, prospective industrial projects have been shelved or moved to the western part of the country. 

Data from economic surveys show no major industry is in the works in the upper Bihar and West Bengal region. Developments in Odisha are too far off to have any effect on the train lines. The thin feeder routes from the Sonnagar station run to Durgapur in West Bengal via Gomoh, to Tatanagar via Garhwa Road, and Barkakana to Bokaro via Chandrapura.

A link too late

Despite the curtailment, the DFCCIL website states that 95 per cent of the project has been completed. The data, of course, pertains to the financial progress of the project.

For all purposes, DFCCIL now recognises the curtailed 1,337 km section up to Sonnagar in Aurangabad district of Bihar as the final and completed stretch of the project. This is unfortunate. In October 2023, the trial run of the first freight train along the entire stretch of the eastern DFC was completed. A company press release noted: “This was a significant milestone as it marks the completion of the entire 1,337 km EDFC. The entire EDFC is now fully commissioned.”

The high axle load of the DFCCIL tracks offers a parallel set of dedicated lines where freight rakes can travel at speeds of 100 km per hour. The rakes were supposed to cart coal to North India and return with finished products from those industrial belts for export through the ports of Kolkata and Paradip. The linkages for the rail route were planned accordingly. The aborted segment has cut into these possibilities sharply. It has also raised the cost of the debt raised from the projected capital structure of DFCCIL, which has a debt-equity ratio of 3:1.

The DFCCIL business plan was relatively simple. Both the Japan International Cooperation Agency (JICA), which is financing the western DFC, and the World Bank had estimated that the projects made business sense. DFCCIL was supposed to earn a Track Access Charge from the Railways for allowing the use of its lines as a percentage of the freight revenue. 

A JICA estimate notes “that the project is sustainable over the long run despite a relatively small percentage of the freight revenue being assigned to the DFCCIL in the form of Track Access Charges. Profit after tax is forecast to be Rs 363 crore in 2018, growing to Rs 572 crore in 25 years. This reflects the efficiency that will be brought in by DFCCIL in operations and maintenance through increased mechanisation, reduced manpower norms, induction of new technology, systems, etc.”

The total cost of the project, including both arms, as per the company, was pegged at Rs 81,459 crore, including the cost of land. The total cost was approved by the Cabinet Committee on Economic Affairs in June 2015. Of this, the cost of land was estimated at Rs 8,067 crore.

The delays have also raised questions about the western DFC. JNPT is rapidly ceding its status as the pre-eminent port to Mundra and Deendayal ports in Gujarat. So rail links to these ports are far more necessary than JNPT. Also, with the commissioning of the Atal Setu in the deep south of the city, the case for the rail transportation link has become even weaker. A recent media report noted that trucks and buses using the bridge have shot up by over 700 per cent between January and August this year.

A way out, the Roll on Roll off (RoRo), where trucks would be carried on rails long distance and then provide last-mile connectivity, has also not caught on. In 2021, a RoRo service on the western DFC began on a single route, from Rewari in Haryana to Palanpur in Gujarat. It has been shuttered. On the eastern DFC, it was not even possible to begin due to no financially viable tariff for potential customers.

Of the $317 billion freight and logistics market in India in 2024, the Railways now account for only 31 per cent of the movement. Sixty-five per cent of the movement is via roads. DFCCIL was supposed to take the share of rail to 45 per cent.