Railways might end up pumping 12,000 crores to build freight corridor

In another endeavor at public-private Participation (PPP) foundering, the Ministry of Railways might need to build up a critical Rs 12,000-crore stretch of a dedicated freight corridor at its expense, senior officials have told Business Standard.

“A proposal was moved to the Railway Board to construct the 371-km stretch between Sonnagar and New Andal through a railway organization itself,” a senior executive of Dedicated Freight Corridor Corporation (DFCC) said.

The Sonnagar, Bihar, and Dankuni, West Bengal, 538 km long stretch were envisaged as the railways’ high watermark in monetizing operations, allowing private players to benefit from the traffic on the Eastern Dedicated Freight Corridor (EDFC). However after many unsuccessful deliberations, the railway’s ministry now is looking to take up 75 percent of the project in engineering procurement and construction (EPC) mode, a senior government official confirmed.

“The hybrid design build finance operates transfer (DBFOT) was a project-specific model designed for this stretch. The plan was to bring in a private player to build and maintain the infrastructure — to isolate the concessionaire from freight traffic volatility, the provision of availability charge was made,” said a senior railway official who was among the architects of that PPP model.

The private player was to be paid a fixed amount for making the corridor available for around 20 hours, irrespective of how many trains used the route each day, with variation clauses in place.

With several private parties showing interest, the official said, they were anticipating a private player under this revised framework. However, with approvals from the Union cabinet on the hybrid DBFOT still awaited, the process continues to linger.
The stretch is crucial with multiple nodes stretching out to essential commodities like coal and steel. Therefore, internally we want to ensure its completion quickly and the PPP plan may go against that,” a senior railway ministry official said, adding, due approvals, including from the Cabinet, would be required before proceeding with the plan.

As per the DFCC executive quoted above, the cost of the project cost is close to Rs 12,000 crore now, and await approval to begin work on our own as in the rest of the corridors.

Conceptualized years ago, the project is seeing scarce progress. Union Finance Minister Nirmala Sitharaman had announced the PPP ambitions of the Centre for the EDFC in her 2021-22 Budget speech, but the project lay still.

Earlier, the railway’s ministry due to its reluctant nature of surrendering operational control to the private player has struggled to monetize its assets. This has made the latter apprehensive about their functional autonomy during the concession period.

In this case, it ended up breaking the corridor into two bits of roughly 270 km each. The Sonnagar-Gomoh section was then extended to Andal in West Bengal.

The railway’s proposal for private participation in the 261 km Sonnagar-Fomoh stretch was chastised in the 101st meeting of the PPP Appraisal Committee, chaired by the finance ministry. The committee had told the railways that its proposal for private participation in the 261-km Sonnagar-Gomoh stretch was more like an EPC contract with annuity payments than a PPP model. It was later in December 2021, that the committee has shown a green flag to the revised hybrid DBFOT model for the section, albeit asking the railways to address minor concerns.

While the EDFC is expected to be completed by June 1, the Western DFC is slated to take slightly longer due to contractor issues and land acquisition delays.

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