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World Bank okays $650-mn loan to eastern freight corridor

Business Standard:  July 02, 2015

New Delhi: The World Bank on Wednesday said it has approved a $650 million debt funding for a part of the eastern arm of the ambitious Dedicated Freight Corridor (DFC) project.

The loan, which comes with a 22-year maturity period, is expected to help in faster and more efficient movement of raw materials and finished goods between the northern and eastern regions.

The Eastern Dedicated Freight Corridor is to be 1,840 km long, from Ludhiana to Kolkata. The World Bank is supporting the EDFC as a series of projects in which three sections with a total route length of 1,146 km will be implemented.

The third tranche of the World Bank loan EDFC 3 approved today will help build the 401 Km Ludhiana-Khurja section spanning Uttar Pradesh, Haryana and Punjab. The Project will help increase the capacity of these freight lines by raising the axle-load limit from 22.9 to 25 tons and enable speeds of up to 100 km per hour.

"Implementing the Dedicated Freight Corridor program will provide India the opportunity to create one of the world's largest freight operations. The corridor, which will pass through states like Uttar Pradesh and Bihar, will benefit from the new rail infrastructure, bringing jobs and much-needed development to some of India's poorest regions," said Onno Ruhl, World Bank Country Director in India. "Moving freight from road to rail will also reduce the carbon footprint of freight by 2.25 times," he added.

The World Bank board had in 2011 approved the first tranche of the loan of $975 million for the 343 Km Khurja-Kanpur section (EDFC1) already under implementation. So far, the Dedicated Freight Corridor Corporation (DFCC) has awarded contracts worth $700 million for this section. Compensation has been awarded for about 95% of the 1,410 hectare of land being acquired from 29,253 affected farmers.

The Bank had in April 2014 approved the second tranche of the loan of $1.1 billion for EDFC2 which covers 402 km from Kanpur to Mughal Sarai. Under EDFC2, civil works contract for around $800 million have been awarded and contracts worth $240 million for establishing rail systems are under procurement.

The eastern and western arms of the DFC project are expected to help India increase the railways' transportation capacity by building high-capacity and high-speed dedicated freight corridors along the Golden Quadrilateral. Currently, the rail routes connecting the quadrilateral between Delhi, Mumbai, Chennai and Kolkata account for 16% of the railway network's length but carry more than 60% of India's total rail freight.

India's road transport has advanced more rapidly than railways and now accounts for about 65% of the freight market and 90% of the passenger market. Apart from efficiency improvements, the DFCC project is also expected to contribute in reducing Green House Gas (GHG) emissions. The government is also planning to set up 7 integrated manufacturing clusters using EDFC as the backbone. These clusters will be set up with an investment of around $1 billion on either side of EDFC.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.