Indian Railways to tender construction of new freight lines

According to the tender documents currently under preparation, the contracts will cover construction of the 260km Sonnagar - Gomoh line and the 291km Gomoh - Dankuni line within five years from the contract being awarded. IR will guarantee a 14% return on investments for 15 years, a senior DFCCL official said.

Dedicated Freight Corridor Corporation Limited (DFCCL), an IR public-sector undertaking, will use the annuity model for the contracts in order to attract wider participation from private parties, instead of the design build finance operate and transfer (DBFOT) model it has used previously.

Officials said the DBFOT model was being phased out as it has not had the expected result of inducing competitiveness in order to bring down overall transport costs. “Private parties operating under this model have been finding it difficult to continue paying a cumulative 3% annual interest to IR, as stipulated in the contract documents,” a DFCCL official said. “Since there are few terminals on the freight corridor routes, private parties have been unable to make anticipated profits.”

DFCCL sources said 87% of the land required to build the two sections has already been acquired.

DFCCL has convened a stake-holders conference on October 30 to announce the offer. “Approximately 150 private firms will be represented at the conference,” a DFCCL official said.  “Based on inputs from private investors, the DFCCL will float the two tenders by the year-end.”

According to Japan International Cooperation Agency (Jica) and World Bank estimates, freight traffic on the Eastern DFC is expected to reach 239.4 million tonnes within 20 years, while traffic on the Western DFC is expected to reach 257.6 million tonnes.

Implementation works on the Eastern and Western DFCs, which have been underway since 2006, have been ramped up in recent months. Contracts worth Rs 523bn have been awarded so far, amounting to 97.8% of the total cost. During 2018-19, the DFCCL spent Rs 67bn on project implementation, compared with Rs 39bn the previous year.

Work on building the Delhi - Mumbai industrial corridor and the Amritsar - Delhi - Kolkata industrial corridor alongside the two lines has also been activated.

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