India’s Plan to Slash Freight Times to 14 Hours From 14 Days

Plagued by delays, red tape and disputes over land acquisition, for years it seemed the RM406b
Delhi-Mumbai Industrial Corridor would remain a dream

By Bibhudatta Pradhan & Iain Marlow / BLOOMBERG

A US$7.1 billion (RM28.83 billion) rail corridor in Rajasthan that’s set to cut freight times between India’s capital New Delhi and the business hub of Mumbai to 14 hours from 14 days is finally showing signs of progress.

About 800km away in Gujarat, a 920 sq km industrial area is taking shape near the village of Dholera, with hundreds of workers fusing concrete sections of a sewerage system on a recent visit. Summing up the massive project’s ambition, a sign for a yet-to-be-built housing development reads: “Dream City”.

A sewage system under construction in Dholera. The future of Dholera is dark, says a farmer activist Rabari

Plagued by delays, red tape and disputes over land acquisition, for years it seemed the US$100 billion Delhi-Mumbai Industrial Corridor (DMIC) would remain just that — a dream. First proposed more than a decade ago, the sprawling assortment of smart cities and industrial parks on both sides of the freight railway could cut logistics charges that amount to roughly 14% of total costs by bypassing the country’s infamously chaotic major cities.

“It’s not merely a pie-in-the-sky project,” said Michael Kugelman, senior associate for South Asia at the Woodrow Wilson Centre in Washington. “It’s a very real initiative that’s gotten off the ground. If it can get over some significant humps, it could make some very real progress.”

Japan, seeking to boost ties with India as a counterweight to China, is partly financing the DMIC project and holds a 26% stake. Indeed, Japan’s Tokyo-Osaka industrial corridor is an inspiration. NEC Corp has invested in a joint-venture (JV) project with the Indian government that is already providing logistics support along the route.

“In the last couple of years, we’ve seen that the pace of construction has quickened considerably,” said Piyush Sinha, who heads the JV as NEC’s India director.

Pledges Contingent on Progress
For others, initial pledges remain contingent on the project’s progress. Airbus SE signed an agreement to assist in planning an “aerospace and defence manufacturing cluster” in Dholera, but pending an order of military helicopters from the Indian government, the French aviation giant hasn’t made any firm plans to invest there yet.

“We are in touch with several states to identify the right location for setting up the final assembly line and certainly we are looking at Dholera,” said Ashish Saraf, a VP at Airbus India, in an email.

New Delhi’s regional rival China has steamrolled ahead with its own infrastructure push, with roughly US$55 billion in planned investments rolling out across Pakistan as part of its global Belt and Road Initiative.

“Japan’s generous funding has made the DMIC and the rail line possible in the first place — our job was to execute the project and we haven’t done too good a job,” said Manoj Joshi, a distinguished fellow at New Delhi’s Observer Research Foundation think-tank. “It is not a good augury for a country wanting to come up with an alternative to Belt and Road.”

No Smooth Sailing
Workers in Dholera are laying infrastructure over a 22.5 sq km area in plots that are mostly owned by the government. Officials said this will be completed by the end of 2019, and they can then sell plots to factories. In three decades, they envision a city larger than Berlin.

The goal is to set up a “plug and play” environment for investors, said Jai Prakash Shivahare, MD of the Dholera Industrial City Development.

“We are looking to tie up with anchor investors so that they can also start their construction and in one-and-half-years, when our site is ready, their factories can also be ready.”

Railway construction in Rajasthan. Authorities say they are arranging RM2b for land acquisition in the state

Work has now begun in four of the eight manufacturing destinations proposed in the first phase of the industrial corridor. But it has been far from smooth sailing to get to this point as red tape and budget constraints across six states and numerous sprawling ministries slowed progress, causing some to walk away altogether.

Hindustan Construction Co Ltd signed two separate agreements in 2009 and 2011 with Gujarat to invest roughly US$8 billion for a waterfront city and a renewable energy park. Later, the company abandoned the plans. Company spokesman Sandeep Sawant declined to comment.

Development beyond the initial 22.5 sq km area in Dholera remains uncertain as farmers opposing land sales have a case pending in the Gujarat High Court demanding the government scrap its plans. “The future of Dholera is dark,” said Sagar Rabari, a farmer activist in Gujarat.

Innovative Financing
In Rajasthan, where roughly 40% of the freight line passes, the state still hasn’t taken possession of land five years after the process began, even as bureaucrats seek to woo investors by publicising two proposed industrial townships.

Unlike Dholera, farmers in the Khushkhera- Bhiwadi-Neemrana area do want to surrender their plots, but can’t as the state government doesn’t have enough money to pay for the 14 sq km of land.

Villagers, meantime, aren’t allowed to sell to anyone else. “Farmers are the losers,” said Sube Singh Yadav, 64, a villager in Shahjahanpur. Rajasthan authorities said they are arranging 32 billion rupees (RM2.02 billion) for the land acquisition.

“We will be proceeding with the land acquisition with innovative ways of financing,” said Rajeeva Swarup, additional chief secretary for Rajasthan’s industry department.

Most of the land needed for the freight corridor has been acquired, funding has been completed, contracts have been awarded and a phased start from December 2019 is expected, the Dedicated Freight Corridor Corp of India Ltd said in a statement. The whole corridor will be completed a year later, it said.

Much like Moody’s Investors Service, which last month raised India’s sovereign rating for the first time since 2004 citing potential dividends from reforms, some analysts are looking through the haze of short-term uncertainties to bet on the project’s prospects. But even with progress picking up, few expect anything but a bumpy road ahead.

“It’s a national flagship project, yes, but despite a fair amount of coordination from the centre, the fact remains that the project just has so many moving parts,” said Jan Zalewski, a Singapore-based Asia analyst at Verisk Maplecroft, a political risk firm. “The DMIC in its entirety will continue to move ahead at a snail’s pace.”