Due to its high dependence on roads for the goods’ movement, India had long suffered from high logistics costs and slow economic progress. This situation is expected to change next year when Eastern Dedicated Freight Corridor and Western Dedicated Freight Corridor are set to be operationalised after the completion of the first phase of the DFC project.
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What is the Dedicated Freight Corridor?
- The Dedicated Freight Corridor (DFC) is the largest infrastructure project of the Railways in Independent India.
- Approved in 2006, the project involves the construction of 6 freight corridors traversing the entire country.
- Its objective is to provide a safe and efficient freight transportation system in India.
- The project is being developed on the Public-Private Partnership Model.
What are the arms of the DFC?
- The DFC consists of 6 arms – Eastern DFC (connects Punjab and West Bengal), Western DFC (connects UP and Maharashtra), North-South (Delhi-Tamil Nadu), East-West (West Bengal-Maharashtra), East-South (West Bengal-Andhra Pradesh) and South-South (TN-Goa).
- While the first two – EDFC and WDFC – are in progress, the rest are still in the planning stage.
About EDFC and WDFC:
- The first phase of the DFC project involves the construction of 1,504 km-long Western DFC and 1,856 km-long Eastern DFC (total of 3,360 km).
- Both EDFC and WDFC are fully electrified and they will intersect at Dadri, near Delhi.
- While the former is funded by the World Bank, the latter is by the Japanese International Cooperation Agency (JICA).
- The World Bank will also assist in the development of logistical parks along the DFC’s routes to facilitate intermodal transport, develop safety management and set up a research institute.
- These two corridors will pass through 9 states and 60 districts.
- EDFC starts from Sohnewal (Ludhiana) in Punjab and ends at Dankuni in West Bengal.
- It passes through Punjab, Haryana, UP, Bihar, Jharkhand and West Bengal.
- WDFC starts from Dadri in UP and end at JNPT in Mumbai, touching all major ports along the way.
- It covers Haryana, Rajasthan, Gujarat, Maharashtra and UP.
- The EDFC and WDFC are together estimated to cost USD 11.38 billion.
- While the EDFC will mainly serve as the coal circuit from coal fields in eastern India to thermal plants in the northern parts of the country, the WDFC will improve capacity for carrying export-import traffic of industries in northern India and logistical parks are expected to be set up on the Delhi Mumbai Industrial Corridor.
What is DFCCIL?
- The Dedicated Freight Corridor Corporation of India (DFCCIL) was set up in 2006 by the Indian Government to implement the DFC project.
- This special purpose vehicle comes under the aegis of the Railways Ministry.
- Its objectives are:
- Construct DFCs within budgeted timelines and costs
- Reduce the cost of operations by adopting international best practices
- Provide Indian Railways with additional line capacity for running freight trains and assure safe and reliable operations.
- The DFCCL began building the EDFC and WDFC simultaneously in three phases.
What is the BOT model mulled by the Indian Railways?
- The Indian Railways is considering the introduction of a build-operate-transfer (BOT) model for the construction of DFCs by including private players.
- Design, Build, Finance, Maintenance and Transfer (DBFMT) is a type of BOT model that is to be first experimented in the stretch of the EDFC between Sonnagar (Bihar) and Bankruni (West Bengal).
- Under this BOT model, a private unit will build the project, operates it and later transfers it to the original owner after a certain period of time.
- This PPP model received approval from the Railway Board and is under the consideration of the NITI Aayog.
- The DFCCIL will float a tender for this after it gets clearance from NITI Aayog.
- If the DBFMT is found to be successful, it will be replicated in the future DFC projects that were announced during the recent budget. These DFCs include East Coast Corridor, East-West Sub Corridor and North-South Sub Corridor.
What are the benefits of the DFC project?
- The project will enable the shifting of around 70% of currently running freight trains from the Indian Railways network to new freight corridors. This will enable the accommodation of more passenger trains and freights.
- The project is expected to reduce congestion at various terminals and junctions and allow for the effective and speedy movement of freight along the corridor.
- Since all DFCs are to be interconnected with one another, there will be a seamless transfer of freight traffic.
- DFC will get Track Access Charge (toll paid for accessing rail network) from the Indian Railways and generate its own freight business.
- This is significant since the Indian Railways carries the fourth largest tonnage of freight in the world after China, the US and Russia.
- Despite there being an increase in demand for freight train usage, the carrying capacity has not increased correspondingly.
- The Golden Quadrilateral corridor connecting Delhi, Mumbai, Kolkata and Chennai accounts for only 16% of the total rail length.
- Yet, it carries 52% of the passengers and 58% of freight.
- Currently, there is a high dependence on roads for goods movement.
- Road transport carries 57% of freight and rail (cheaper mode of transport) carries just 36%.
- According to the Draft National Logistics Policy, the reason for the higher than average logistics cost in India is because over 60% of the transportation activities are via road.
- The DFC will reduce the dependence on the road for logistical needs.
- It will reduce freight charges by up to 50%. This benefit will be passed on to the end-customers.
- The tracks of DFCs are capable of carrying heavier loads than most of the Indian Railways.
- These corridors use 260-metre long rail tracks instead of the usual 13 metres. This reduces the number of welding joints, enabling the journey to be smoother and faster.
- It will enable speedy transportation of food grains and fertilizers from the northern region to the eastern and Northeast regions.
- The goods movements are further hastened as these freight corridors are almost free from permanent or temporary speed restrictions put forth by the Indian Railways.
Supports economic growth:
- The agriculture sector will see major growth upon completion of the project since the agri produce will get a pan-India market.
- Other sectors to benefit from this project are the E-commerce and manufacturing sector.
- Private containers are allowed to use DFCs. However, they are required to pay track usage charges.
- It is estimated that DFC will return more than 5.5 times the value of money invested in it. This will be through industrial development, job growth and the logistics sector.
- New multi-model logistics parks, freight terminals, container depots/terminals, parcel hubs and other facilities will be developed in the adjacent areas.
- This will attract more investments for further development of the economy.
- This will benefit local businesses and attract large-scale manufacturers.
- Since DFCs are exclusively meant for freight movement, there will be one station every 50 km as opposed to 10 km in railways. This will reduce the manpower, maintenance and operational costs.
- DFCs will help reduce carbon emission from the transportation sector. This is because DFCs are fully electrified and their energy sources are derived from open source, which will be greener and cheaper and reduce dependence on imported fuels.
- In addition, solar panels are to be set up in surplus lands. They are expected to reduce net energy requirements.
- The locomotives are equipped with regenerative braking, which will further reduce energy consumption.
How is the project being implemented?
- The use of modern technology and innovation is enabling the rapid progress of the DFC project.
- Seven modern track construction machines are being used. Each of these can lay up to 1.5 km of new track each day.
- The progress of EDFC is being monitored by the state-of-the-art operations control centre (OCC) at UP’s Prayagraj.
- The OCC controls and monitors train operations and power supply using Asia’s largest video wall, which is equipped with an integrated train management system, supervisory, control and data acquisition system.
- It will act as the command centre of the entire EDFC.
- The WDFC will also have a similar centre in Ahmedabad.
- According to the Concession Agreement between the Indian Railways and DFCCI, the former will initially be the sole operator of the DFCs and the latter will be the infrastructure manager.
- At the later stage, the DFCCI will switch over to a multiple operator regime.
- During the single operator regime, the Indian Railway will provide wagons and locomotives. It will transfer a minimum of 70% of its freight traffic to DFC and pay track access charges to DFCCI.
- In the multiple operator regime, the rolling stock and locomotives may be owned or leased by licensed private train operators.
- The concept of integrated maintenance depots at every 150 km distance is also being envisaged. These are to take care of all activities related to infrastructure and rolling stock maintenance.
What is the National Railways Asset Monetisation Plan?
- The Indian Railways is to monetise assets through the EDFC, WDFC, station redevelopment, railway land parcels, multi-functional complexes, railway colonies and stadiums.
- As part of this plan, the Ministry of Railways has set the target to raise 90,000 crore through asset monetisation in 2021-22 (April-March).
- Asset monetisation is the process of extracting the value of investment made in the public assets, which have not yielded sufficient returns until now.
- Under this plan, the asset monetisation of the DFCs will be done in a phased manner.
- The individual entities will first be listed on the stock exchanges and then they will gradually be disinvested after they are fully operational.
- The WDFC and EDFC, which are expected to be operational in 2022, will be leased or handed over to private players to raise funds.
- The successful asset monetisation of the freight corridor depends on DFCCIL gaining profits before the initiation of the monetisation process.
- A new monetisation model is also being proposed. Under this model, the DFCs will have special train timings allotted for private parties through a bidding process.
- The initial asset monetisation plan also includes tracks being leased out to private players for train operations and for allowing telecom companies to use freight corridors’ optic fibre networks.
- The National Railways Asset Monetisation Plan also includes awarding 150 passenger trains to private players in 2021-22.
- There are also plans to redevelop 50 railway stations by the end of March through the PPP model.
- The main source of the redevelopment project will be from the commercial development of spare railway land/airspace in and around the station.
- With this, the vacant lands belonging to the Indian Railways will generate non-tariff revenue.
What are the challenges?
- During the initial years of the approval of the DFC project, there were considerable delays. The main reasons for this include slow land acquisition, lack of cooperation from state governments, lack of consensus on design, rebidding of construction contract and low capital expenditure.
- It was also difficult to get speedy loan approvals to fund the project. It was only after extensive negotiations that the World Bank and the Japan International Cooperation Agency agreed to fund the project.
- In addition, there are several conditions for the JICA loan hindering the progress of the project. Some of these include:
- The requirement of 30% of the loan being used for importing equipment and goods from Japan
- All contracts for WDFC must have a Japanese firm as the lead partner
- These conditions narrow down the scope for competition and increase the procurement cost.
- Land acquisition has been a significant problem, especially in Maharashtra and West Bengal.
- For instance, in Maharashtra’s Jawaharlal Nehru Port, where the WDFC ends, there are around 3,000-4,000 non-title holders who need to be given compensation. This comes under the jurisdiction of the state government.
- Along this region is also the issue of felling of around 12,000 trees and displacement of 20,000 families in Thane and Raigand District for the development of the Delhi-Mumbai Industrial Corridor, which is critical for realising the WDFCs potential.
- This is expected to cause long-term ecological damage and increase man-animal conflicts.
- Since land acquisition is being a major hindrance, there requires a constant re-examination of the corridors’ alignment.
- This further increases the time consumption and capital expenditure for the project completion.
- Contractors involved in the project were also blamed for the slow progress.
- They are facing a cash crunch and shortages in manpower and material resources due to the COVID-19.
What can be the way forward?
To gain the full potential of the DFC project, the following measures need to be taken by the government:
- As previously mentioned, the DFCs are expected to reduce the operational costs of the Indian Railways. These benefits should be passed on to the end-customers by lowering tariffs. This will enable railways to gain a competitive edge in the logistics sector.
- Boosting industrialisation along with the adjacent areas of DFCs. While projects like Delhi Mumbai Industrial Corridor (DMIC) along WDFC and Amritsar Kolkata Industrial Corridor (AKIC) along the EDFC is in line with this aspiration, there have been considerable delays.
- Such infrastructure developments must be undertaken with consideration of the negative impacts on ecology and the local population. Innovative infrastructure models like the development of wildlife bridges can be considered.
- Develop supportive infrastructure for seamless movement of goods like perishables. Logistics parks and facilities should be enhanced for this purpose. The private entities can be roped in to build these facilities.
- The equal focus must also be given towards the last-mile connectivity using feeder networks.
Dedicated Freight Corridor has the potential to enable India to become a 5 trillion dollar economy. However, this can be realised only if progress is made towards the development of supportive infrastructures like industrial parks and the critical examination of the environmental implications and interests of the local population.
Practice question for mains:
Critically examine the implications of complete operationalization of the Dedicated Freight Corridor. (250 words)