Economic Highlights

New Delhi, 5 March 2009

Railway Freight Corridor

LALU’S SHOWMANSHIP OF TRACK

By Shivaji Sarkar

Gimmickry is something Railway Minister Lalu Prasad Yadav is well known for. The recent being the proposed eastern freight corridor, which will be inaugurated for the second time.  The foundation stone for the project was laid by Prime Minister Manmohan Singh in September 2006 at Ludhiana, months before elections were held in Punjab.

This time around he has chosen his home State Bihar for a 105-km stretch from near Mughal Sarai to near Sonnagar, a stretch, where a third railway line largely dedicated to goods traffic already exists. It is used for transporting coal. The freight projects, both eastern and western are targeted for completion in 2015 provided the actual work begins now. However, in all probability these are going to be delayed.

The railway budget for 2006-07 had announced the eastern and western freight corridor projects, which are expected to cost Rs 28,181 crore and Rs 16,592 crore respectively. The eastern corridor is proposed to extend from Ludhiana to Dankuni, 20 km from the Kolkata port, wherein logically it should have been extended to Kolkata or the Haldia port.

Lalu is a showman alright. He has a talent to cover up his tracks. He did so as Bihar’s Chief Minister and has now extended it to the Indian Railways. So, he doesn’t find anything wrong in inaugurating the Eastern freight corridor, which was originally to extend from Ludhiana to Kolkata, for the second time. All this, despite the fact that an inauguration is not without a cost to the exchequer. Each such programme has many overt and hidden costs. It is not merely borne by the railways but many such costs have to be borne by the State governments, involving areas like transportation, law and order, security and other paraphernalia.

The freight corridors are no longer a novelty as are being touted. The corridors have been discussed for many years. In fact the need was felt and stressed in the eighties. No major project comes up in a day. It is a slow process, which includes processes, evaluations and cost studies before it is finally launched.

For a major project like this no single railway minister could claim credit. In fact, the ministers are clearly incidental as projects are evolved owing to their functional utility. These are conceived and given shape by railway officials and engineers often in consultation with State governments and the Planning Commission.

While the corporate world is well-versed with repeating shows to launch their products in the metros and major cities, if the same is done by the Railways it does cause concern. This is so because the Railways are not as cash rich as its minister would have it projected. In fact, one could say that the image is engineered, like Lalu being the “management guru”. The Railways paid Rs 50 lakhs to IIM, Ahmedabad for organizing the minister’s “management” lecture. A similar exercise is said to have been undertaken with Harvard University as well.

Interestingly, even as Lalu has declared a surplus of Rs 25,000 crore in 2008-09 budget, the Railways is in search of foreign funding assistance, including a loan from Japan, the World Bank and Asian Development Bank (ADB). Apparently, it is clarified in this year’s budget that the actual surplus is not more than Rs 5,000 crore, if the borrowings of Rs 8,000 crore are taken into account.

Barring the Japanese government, no one else has yet made a commitment. However, Japan has refused to give any assistance for the eastern corridor as its estimates did not find the corridor a viable project. The reason being that the returns would be lower as Kolkata being a riverine port is not expected to generate the amount of traffic required. And thus, the eastern corridor is seen to have fallen behind the western corridor project, which the Japanese have decided to support.

This has forced the Railways to take up the small section of 105-km in Bihar from its own resources. The total proposed length of the corridor is however, 1805 km, but the Railways have chosen to remain silent about the rest of length. There is much apprehension in the railway ministry that the 105-km section may lock up funds as work would be going in a piecemeal manner.

Till now, the railways had approached the World Bank for $2.5-billion assistance and the ADB for technical assistance for the eastern corridor. But no commitment has yet been received. Understandably so, as the world economy is passing through a critical phase, wherein it is unclear from whether funding from the two institutions would be forthcoming.

Tokyo has committed to ODA loan of Rs 17045 crores, for the first phase of the western corridor. This amounts to 62 per cent of the total cost of Rewari – Vadodara stretch. It is also likely to provide a similar loan for the second stage of the western corridor, extending to Jawaharlal Nehru Port Trust in Mumbai. The PM had laid the foundation stone for the project on October 5, 2006. Sadly, since there has been little progress on construction activity, the financial tie-ups have not been finalized.  Work on both the projects was to begin in the current financial year, but it is not possible now.  

A close look at the projects shows that the first works that need to be taken up are 54 important bridges over a stretch of 200-km on the Western corridor, and 105-Km section on the eastern Corridor. While bids for project management consultancy as well as turn-key contracts in these sub-projects have reportedly been received, their evaluation is yet to be completed. It is difficult to understand why are politicians announce such inauguration jamborees when outcome is clearly doubtful?—INFA

(Copyright, India News and Feature Alliance)