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At the corridor of development

Projects

To take stock of current status of India’s ambitious dedicated corridor projects, Anil Mathew speaks to Amitabh Kant IAS, MD & CEO, Delhi Mumbai Industrial Corridor Development Corporation Limited. Here are the excerpts.

Are Dedicated Freight Corridor (DFC) and Delhi-Mumbai Industrial Corridor (DMIC) still at the planning stage? If not, how far have they progressed?
The draft business plan of DFC is presently under discussion and approval by the Ministry of Railways and Dedicated Freight Corridor Corporation of India (DFCCIL). Japanese Bank for International Cooperation (JBIC) has agreed to fund the Western Corridor, whereas the World Bank and Asian Development Bank are examining the funding of the Eastern Corridor. The final location survey has been completed on Western DFC, and Ludhiana-Sonnagar section of Eastern DFC. The process of land acquisition has been started for about 2400 kilometers. The construction contracts (EPC) for 105 kilometers of Eastern DFC, and 54 major and important bridges of Western DFC have been awarded.
The planning for DMIC is being undertaken in a phased manner. In the first phase (Phase IA), the planning is currently being carried out for six Investment Regions (IRs), one in each of the six DMIC states. In this phase, a macro level socio-economic assessment in the form of a detailed Perspective Plan was also initiated and the final report has been completed. The node level planning in six investment regions identified in Phase 1A is currently ongoing.

While the corridor is extremely good as a concept, how political, financial and social risks that invariably accompany such major projects will be addressed?
The DMIC region comprises of 24 high impact/market driven nodes in the form of integrated IRs and Industrial Areas (IAs) that were identified after wide consultations with the respective state governments and the concerned central ministries. Each DMIC state has identified a state level nodal agency, which is responsible for co-ordination within the state and with the centre for planning of the IAs/IRs and implementation of identified projects. A high level committee under the office of the Prime Minister has been constituted for monitoring the development activities.
The DMIC’s vision is to create strong economic base in this band with globally competitive environment and state-of-the-art infrastructure to activate local commerce, enhance foreign investments and attain sustainable development. The project not only aims significant increase in industrial output and exports, but also local employment in a five-eight year period. The development envisages inclusive growth in a sustainable manner. The planning of the various IAs/IRs will incorporate integrity in resource, traffic and waste management, cost-effective recovery of value, recycling of wastes and materials, environment protection and as far as practicable, reduction of risks to health.
The initial estimates during the conceptual planning in 2007 indicated that there is a potential to implement projects, worth 75% of the estimated overall investment, through the public-private partnership (PPP) route. The Indian government has also emphatically stressed upon involvement of the private sector in participating in the India growth story. But with the changed economic scenario due to economic and financial turmoil in the world market, the appetite of the infrastructure players for the projects seems to be quite limited because of not-so-free availability of loans/monies and the figure is bound to decrease. The balance, which is not amenable to private participation, would be funded through budgetary sources of respective central/state agencies and Viability Gap Funding (VGF)/Indian Infrastructure Finance Company Limited (IIFCL) schemes of Government of India and by availing loans from bilateral/ multilateral agencies. Official Development Assistance loan from the Japanese bank JBIC is also under discussion between the governments of the two countries for implementing projects in areas like water sourcing, environment conservation and eco friendly development.

India has so far a poor track record in the field of infrastructure and logistics, the backbone of any developed nation. How far the DMIC would change the scenario for the better?
The DMIC corridor has been planned along the Western DFC that offers high-speed connectivity between Delhi and Mumbai. DMIC is positioned to take advantage of the DFC by facilitating seamless connectivity, while offering immense opportunities for development of an industrial corridor along the alignment the transport infrastructure. The integrated corridor development approach will promote optimal utilisation of existing resources and promote an attractive investment climate through development of quality industrial clusters/ special economic zones with world class physical, social and other complementary infrastructure. Several large multi-modal logistics parks will be developed along this stretch with feeder rail and road connectivity to hinterland and markets to enable efficient processing and movement of cargo for domestic consumption and exports. In the perspective plan, assessment of the major road and rail network has been done and improvement plan by augmentation and constructing of new links has been suggested.

What would be the role of private sector in developing logistics facilities, feeder railway connectivity and augmentation of port connectivity and power supply system?
In an endeavor to raise the investment in infrastructure from its existing levels of 5% of GDP to around 8%, Government of India is actively promoting PPP in the key infrastructure sectors viz. transport and logistics, power, urban infrastructure, tourism and railways. PPPs are seen as an important tool for producing an accelerated and larger pipeline of infrastructure investments. Private players will be encouraged to take up the projects, which are identified for implementation through the planning activities like the overall perspective plan and the node level planning of IRs and IAs.
Each of the six DMIC states has indentified infrastructure projects in sectors like transport, logistics, airport, rail and road connectivity that will become model initiatives to capitalise on the existing potential and mobilise global investments in DMIC region.

What are the unique advantages offered by IRs and IAs? What went into this classification?
An IR is proposed to be a specifically delineated industrial region with a minimum area of 200 square kilometers, while the maximum limit is based on the specific site’s potential. An IA will have a minimum area of 100 square kilometers. The concept of IRs/IAs is similar to the cluster approach, which has been used in various schemes of the Ministry of Commerce, notably the Integrated Industrial Upgradation Scheme.
The IRs and IAs have been classified based on the inherent benefits that they will provide. The benefits of Investment Region are that it will ensure at least one such node in each of DMIC State to spread the economic benefits. It will offer benefit from proximity to metropolitan areas such as Delhi, Mumbai. There is a potential for developing greenfield ports or augmentation possibilities. It will ensure easy availability of such huge land parcels and established industrial base.
The Industrial Areas can take advantage of inherent strengths of specific locations which includes mineral resources, rich agriculture base and skilled human resource base to potentially set up specific group of industries, IT and ITES. This will offer good opportunity to transform under-developed regions along the corridor into developing or well developed regions.

What effect would DMIC make on the country’s GDP?
The DMIC overall Perspective Plan has forecast the potential growth in manufacturing in the corridor for the plan period (2009-2039). The forecast suggests that the value of industrial output could grow 3.5 times between 2010 and 2020 and 14 times from 2010 to 2040. This equates to a CAGR of 13.2% between 2010 and 2020 and 9.2% overall from 2010 to 2040.
The manufacturing growth of 12%-14% will lead to 8%-10% GDP during 2010-2020. These growth figures have also been corroborated in the ‘National Strategy for Manufacturing’ developed by NMCC, Government of India.
The projected manufacturing growth is in line with historically exhibited global industry growth benchmarks. It could be noted that China increased its industrial output more than 10 fold in 27 years (1978 to 2005), Korea enhanced its industrial output by approximately 13 times in 30 years (1970 -2000) and Japan increased its industrial output 8 fold in 30 years (1955 to 1985).
 

It is learned that US$90 to US$100 billion would be required to create the infrastructure in the first phase of the project. How would this huge amount be accumulated? How much foreign and domestic investment the project has attracted so far?
The bulk of the investments in industry and infrastructure are proposed to be financed by the private sector through development of PPP model. The balance could be funded through budgetary sources of respective central/state agencies and VGF/IIFCL schemes of government and by availing loans from bilateral/ multilateral agencies.
To carry out the planning and project development activities, the Government of Japan expressed its interest to make equal contribution, as Government of India, by offering US$125 million, in tranches, as untied loan of JBIC. A framework is being finalised in this regard, in consultation with METI, Government of Japan. Initially, Japan will provide US$75 million through JBIC for DMIC project.
Official Development Assistance is also being sought from the Japanese bank, which is under advanced discussion between the officials of the two governments.

When would you commence the second phase of the project? How much is the estimated cost for its completion?
In the Phase 1 of the project during 2008-2012, six IRs and six IAs would be taken up for implementation and rest of the development would be phased out in the next four years. As per the initial estimates the investment requirements of Phase II would be about 48% of estimated overall investments for the DMIC region.

What would be the role of Japan in developing the Delhi Mumbai industrial Corridor project? How do they stand to benefit from being part of the project?
The governments of India and Japan have identified comprehensive economic engagement as the core element to strengthen their strategic partnership. As part of their proactive initiatives to sustain the continued growth and development of bilateral relations, a joint initiative “Japan-India Special Economic Partnership Initiative (SEPI)” has been launched. SEPI shall provide assistance in promoting the DMIC with development of industrial estates/special economic zones along with high quality physical and social infrastructure and facilitating investments from Japan to enable infrastructure development and promotion of manufacturing, trade and investments in India.
This joint Indo-Japan initiative will promote Japanese investments by taking full advantage of the abundant human resources, ample skills and the PPP policy initiative of the Government of India. The Japanese investments will create employment opportunities in India and help develop India’s infrastructure and enhance its manufacturing capacity. The Japan External Trade Organisation (JETRO) is representing the interests of the Japanese companies in DMIC by supporting the planning activities and joint implementation of projects in the DMIC region.

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