Government of India and World Bank Sign $1.1 Billion Agreement for the Eastern Dedicated Freight Corridor Project

The Government of India and the World Bank today signed a $1.1 billion agreement towards the second loan for the Eastern Dedicated Freight Corridor (a freight-only rail line) that will help faster and more efficient movement of raw materials and finished goods between the north and eastern parts of India. The project was approved by the World Bank Board on April 22, 2014.

The loan agreement for the Eastern Dedicated Freight Corridor Project was signed by Tarun Bajaj, Joint Secretary, Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India; M.K. Mittal, Director, Finance, Dedicated Freight Corridor Corporation(DFCCIL) on behalf of DFCCIL; and Onno Ruhl, World Bank Country Director in India, on behalf of World Bank. Adesh Sharma, Managing Director, DFCCIL and Girish Pillai, Advisor (Infra), Ministry of Railways, were also present on this occasion. 

The Eastern Corridor is 1,839 km long and extends from Ludhiana to Kolkata. The World Bank is supporting the Eastern Dedicated Freight Corridor (EDFC) as a series of projects in which the three sections with a total route length of 1,133 km will be delivered sequentially, but with considerable overlap in their construction schedules. EDFC 2 will build the 393 km Kanpur-Mughal Sarai section in Uttar Pradesh. The Project will help increase the capacity of these freight-only lines by raising the axle-load limit from 22.9 to 25 tons and enable speeds of up to 100 km/hr. It will also help develop the institutional capacity of the DFCCIL to build and maintain the DFC infrastructure network.

“The EDFC will ease congestions choking the railway system and reduce travel-time for passenger trains plying on this arterial Ludhiana-Delhi-Mughal Sarai railway route. The corridor will add additional rail transport capacity, improve service quality and create higher freight capacity,” said Tarun Bajaj, Joint Secretary, Department of Economic Affairs, Ministry of Finance. 

The first loan of $975 million for the 343 km Khurja-Kanpur section in the EDFC program was approved by the World Bank Board in May 2011 and is already under implementation. It has awarded its first major contract for about Rs 3,300 crore for this section. Tata- Aldesa JV, comprising Tata Projects India and Aldesa of Spain, won the contract from among 10 other bidders through an international competitive process. Another major contract, for systems, is under evaluation. Ninety percent of the 1245 ha land needed for the project has been acquired from 22,000 land owners with Rs 336 crore paid off as compensation in addition to agreed resettlement and rehabilitation benefits.

“Implementing the Dedicated Freight Corridor program will provide India the opportunity to create one of the world’s largest freight operations, adopting proven international technologies and approaches which can progressively be extended to other important freight routes throughout the network,” said Onno Ruhl, World Bank Country Director in India. “The project will play a transformational role by reducing greenhouse gas emissions as a result of promoting transfer of freight from road to rail. It will also serve as a catalyst for accelerating economic development in the relatively poor state of Uttar Pradesh through which the line passes. We hope this will lead to communities along the corridor having better access to employment opportunities, health, education and other social services,” he added.    

The EDFC is part of India’s first Dedicated Freight Corridor (DFC) initiative – being built on two main routes – the Western and the Eastern Corridors. These corridors will help India make a quantum leap in increasing the railways’ transportation capacity by building high-capacity, higher-speed dedicated freight corridors along the Golden Quadrilateral. Currently, the rail routes that form a Golden Quadrilateral connecting Delhi, Mumbai, Chennai and Kolkata, account for 16 percent of the railway network’s route length, but carry more than 60 percent of India’s total rail freight.

Augmenting its transport systems is a crucial element of India’s trillion-dollar infrastructure agenda. Since the 1990s, road transport has advanced more rapidly than the railways, and now accounts for about 65 percent of the freight market and 90 percent of the passenger market in India, and those shares are growing.

“The Indian Railways urgently needs to add freight routes to meet the growing freight traffic in India, which is projected to increase more than 7 percent annually. Dedicated freight corridors will not only meet this growing freight demand, but also decongest the already saturated rail network and promote the shifting of freight transport from road to more efficient rail transport,” said Ben L. J. Eijbergen, Lead Transport Specialist and Task Team Leader for the Project

Significant Green Impact: In addition to the efficiency improvement and other operational benefits, the Project is expected to bring in significant reductions of Green House Gas (GHG) emissions. 

A Green House Gas Emission Analysis conducted by DFCCIL for the Eastern DFC Project shows that the Eastern corridor is expected to generate about 10.48 million tons of GHG emissions up to 2041-42, as against 23.29 million of GHG emissions in the absence of EDFC – a 55 percent reduction of GHG emissions.

Economic opportunities are also being explored along the freight corridor. The government is planning to set up 7 integrated manufacturing clusters using EDFC as the backbone. These clusters will be set up with an investment of about $1 billion on either side of EDFC.  

The loan, from the International Bank for Reconstruction and Development (IBRD), has a 7-year grace period, and a maturity of 22 years.

“DFCCIL will be the game changer in the Indian transport sector by providing a cheaper, quicker and safer mode of freight,” said Adesh Sharma, Managing Director, DFCCIL. “We are determined to adhere to the scheduled completion target of Eastern Corridor by December 2019. Ninety per cent of land acquisition for Kanpur-Mughal Sarai section, for which the loan agreement is being signed today, has been completed, and the contract for the civil works will also be finalized by January 2015.  With the finalization of these contracts, the work will be progressing in two-thirds of the total length of Eastern Corridor,“ he added.