Overseas Development Assistance (ODA) under the Special Terms of Economic Partnership (STEP) Scheme of the Government of Japan for the Western Dedicated Freight Corridor (DFC) Project.

The Union Cabinet today approved the proposal for availing Japanese ODA assistance for implementation of the Western Corridor of the DFC project, the first phase of the assistance being estimated at Rs.17,700 crores for the Rewari-Vadodara Section and to start with an engineering services loan of approximately Rs.130 crores. The Japanese ODA loan is a soft loan with very low interest of 0.2% per annum (0.01% p.a. for consulting services), long repayment period of 30/40 years and a moratorium of 10 years. Approval has also been given for the terms and conditions of the tied loan which are briefly enumerated below :

Terms and Conditions of the STEP Loan:

(i) Prime Contractors must be Japanese firms. Joint Ventures (JV) with firms incorporated and re registered in recipient countries are also allowed to be a Prime Contractor, provided a Japanese firm is a lead partner. Sub-contractors may be from any country.

(ii) Not less than 30% of the total amount of contracts (excluding consulting services) financed by the STEP loan must be accounted for by goods and services from Japan. Here, procurement of goods from firms which are joint ventures in a recipient country and in certain developing countries can also be regarded as goods from Japan, subject to certain conditions.

(iii) In the case of consulting services, the prime Contractor i.e. the Consultants will be either Japanese or a joint venture with Indian partners where the total share of work of Japanese partners in the Joint venture is more than 50% of the contract amount.

Background:
In order to augment the rail transport capacity to meet the growing requirement of movement of freight traffic, Indian Railways have decided to develop Freight Corridors along its busy trunk routes. The Dedicated Freight Project on the Western and Eastern routes is one of the most ambitious project but Indian Railway has ever taken up and once completed would meet the transport requirement of the two busy trunk routes for the next 15 to 20 years.

The DFC project envisages a Western DFC (1483 kms) from Jawahar Lal Nehru Port (JNPT) in Mumbai to Tughlakabad and Dadri near Delhi to cater largely to the container transport requirements to and from the existing and emerging ports in Maharashtra and Gujarat and Eastern DFC from Ludhiana in Punjab to Dankuni (1806 KMS) NEAR Kolkata to be extended in future to serve the new deep sea port in Kolkata area, and to largely serve coal and steel traffic.

Funding for the Western DFC has been sought from the Japan International Cooperation Agency (JICA) under the STEP Scheme of the Government of Japan and Government of Japan have conveyed their commitment to the assistance of entire Western corridor.

Implementation strategy and targets:
To implement the DFC project Dedicated Freight Corridor Corporation of India Ltd. (DFCCIL) has been incorporated in October, 2006 as a fully owned subsidiary of Ministry of Railways under Companies Act 1956. The project is to be financed through a capital structure of 2:1 debt to equity ratio with most of the debt coming from multilateral/bilateral agencies like ADB/World Bank/JICA. The Project is likely to be completed by 2017.

Major Impact:
The Dedicated Freight Corridor Project is an important infrastructure project recently identified as an ‘ICONIC’ project to be specially monitored. By connecting the raw material production areas with the consumption centers and linking both to major ports, DFC will positively impact overall growth rates and efficiency in the Indian economy. Further, Delhi-Mumbai Industrial Corridor (DMIC) coming up along the Western DFC will have a multiplier effect on industrial production, employment generation and development of the region as whole.

Expenditure involved:
The cost of the Western DFC Project is estimated to be Rs.26, 124 crores as per current prices.

Number of beneficiaries:
Power Houses, Mines, Ports, Industrial installations, manufacturing units, agricultureal sector, Services sector and the population in the States of Gujarat, Maharashtra and Rajasthan would be benefited.

States/Districts covered:
States of Gujarat, Maharashtra & Rajasthan are covered by the Western DFC Project.

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AKT/AD/SH/VK
(Release ID :52697)