World Bank Signs Loan Agreement with Government of India

World Bank Signs Loan Agreement worth US$ 975 Million with Government of India and DFCCIL for the Eastern Dedicated Freight Corridor Project- I

The Joint Secretary, Department of Economic Affairs, Ministry of Finance, Shri Venu Rajamony, the Country Director India, World Bank, Mr. Roberto Zagha and the Project Director, DFCCIL, Shri Anshuman Sharma signed a loan agreement for the Eastern Dedicated Freight Corridor Project-I, in New Delhi on October 27, 2011. Photo:PIB

The World Bank today signed a US$ 975 million loan agreement with the Department of Economic Affairs, Ministry of Finance, Government of India, and the Dedicated Freight Corridor Corporation of India Ltd. (DFCCIL) to set-up the Eastern Dedicated Freight Corridor-I (a freight-only rail line) that will help faster and more efficient movement of raw materials and finished goods between the Northern and Eastern parts of India. The corridor will also allow Indian Railways to free up capacity and better-serve the large passenger market in this densely populated region.

This 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” – the four rail routes that connect Delhi, Mumbai, Chennai, and Kolkata. Currently, these routes account for just 16 percent of the railway network’s length, but carry more than 50 percent of India’s total rail freight.

“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 Venu Rajamony, Joint Secretary, Department of Economic Affairs, Ministry of Finance. “Augmenting its transport systems is a crucial element of India’s trillion-dollar infrastructure agenda for the next Five-Year Plan (XIIth Plan) which starts in 2012. 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 project also has significant contribution in reducing GHGs and the Government of India is committed to increasing the share of rail transport in this mix, he added.

The agreements were signed by Mr Venu Rajamony, Joint Secretary, Department of Economic Affairs, on behalf of the Government of India; Mr Anshuman Sharma, Project Director, on behalf of the DFCCIL; and Mr Roberto Zagha, Country Director for India on behalf of the World Bank.

The Eastern Dedicated Freight Corridor Project (EDFC) will ease congestion choking the railway system and reduce travel-time for passenger trains on the arterial Ludhiana-Delhi-Mughal Sarai railway route. The corridor will add additional rail transport capacity, improve service quality and create higher freight capacity. It will also help to develop the institutional capacity of the Dedicated Freight Corridor Corporation (DFCCIL) and Ministry of Railways to best utilize heavy haul freight systems. World Bank financing for the EDFC will cover a route length of 1,130 kilometers (out of a total corridor length of 1,839 kilometers) and will be provided in three phases. The Project signed today will finance the first phase, which is the 343 kilometer section that runs between Khurja and Kanpur. 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.

“Eastern & Western Dedicated Freight Corridors are ICONIC projects and will greatly upgrade rail transport capacity and help to increase the market share of railways”, said Mr R.K.Jain, Adviser (Infrastructure), Railway Board

“Implementing the DFC 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 Roberto Zagha, World Bank’s Country Director in India.

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. Unlike the existing rail network, which runs on a combination of diesel and electrical locomotives, the proposed DFC corridor will operate entirely through electric locomotives, thereby further reducing GHG emissions.

A Carbon Footprint Analysis conducted by DFCCIL for the Eastern DFC Project shows the corridor is expected to cause 2.25 times less carbon emissions when compared to a scenario where the freight is transported through a non-DFC network of the Indian Railways. It also 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 millions of GHG emissions in the absence of EDFC – a 55 percent reduction of GHG emissions. EDFC will also bring about a 15 percent reduction in carbon intensity as compared to using existing alternate routes of transport.

“Studies show that DFC will enable the Indian Railways to reduce GHG emissions on these routes by over 64 percent - an actual reduction from 12.3 million tons of GHGs to 4.3 million tons of GHGs as a result of DFC,” said Ben L. J. Eijbergen, Lead Transport Specialist and Task Team Leader for the Project.

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