Rail freight corridor

The group of ministers (GoM) finalising the ownership structure and working of the proposed railway freight corridor, connecting the four metros of Delhi, Mumbai, Chennai, and Kolkatta, would do well to ensure maximum participation of both private and public sector companies. Recent news reports say the GoM has veered to a fully government-owned special purpose vehicle (SPV), funded almost entirely by the Railways.


The private sector is not to be allowed in train operations and its role is to be restricted to project implementation. Not only would this be a major drain on railway resources (the SPV cost is estimated at Rs 66,000 crore and may go up to Rs 1 lakh crore as more corridors get added), but given the mindset, it also casts aside all hopes for a sizable step-up of competition and efficiency.

A fully Railway-owned SPV also goes against the concept plan spelt out in the task force report of the committee on infrastructure which had recommended that ownership of the SPV be vested with the Railways and other users of bulk freight services like oil, coal, iron ore and steel companies, and also port and shipping operators. More important, the SPV was only to own the infrastructure: running of freight trains was to be open to both, Indian Railways and other qualified operators. Such an ownership and operational structure would have ensured more efficient operations and reduced the financial burden on the Railways, allowing it to focus on other important areas.

Indian Railways would be better served if they learnt from China’s experience, where larger private sector participation helped extend the rail network around 20 times faster than here. In the decade ending 2002, India’s single rail network expanded by 682 km, double-track lines by 1,519 km and electrified lines by 5,192 km; in China, the single rail network increased by 13,797 km, double tracks by 9,400 km and electrified lines by 8,975 km.

In fact, 12,367 km of the new Chinese lines were built by local rail corporations, many with private participation, owned and operated separately from the Chinese National Railway. China not only introduced privatisation through local railway joint ventures, but also allows listing of shares on the Hong Kong and New York stock exchanges. During the decade, the Chinese invested $85 billion in the rail network, while Indian investments were just $17.3 bn. In fact, the 394 billion tonne-km increase in freight carried by the Chinese railways during the decade was larger than IR’s entire freight traffic.

Financial Express

about the project:

The Railway Budget 2006-07 has envisaged the construction of a dedicated multi-modal high axle-load freight corridor with computerised control on western and eastern routes. The project entailing an investment of Rs.22,000 crore will be implemented in phases.


In Phase-I of the project, Delhi-Sonnagar (Bihar) and Delhi-Mumbai will be the routes that will be connected and in Phase-II, Mumbai-Chennai and Kolkata-Chennai will get connected.

For the eastern corridor project, a separate freight corridor is proposed from Ludhiana to Sonnagar via Ambala, Saharanpur, Khurja and Allahabad. The proposed western corridor will start from Jawaharlal Nehru Port and routed via Vadodara, Ahmedabad, Palanpur, Jaipur and Rewari to Tughlakabad and Dadri.

The ministry also proposed that a special purpose vehicle (SPV), owned jointly by the railways and users of bulk freight services, including oil companies, is to be created. It also proposed that the SPV will be required to leverage equity of Rs.7,500 crore and to raise a debt of Rs.15,000 crore for financing the project.

Since the project will not be considered commercially viable by private investors initially, investment will have to be made primarily by the railways and the public sector undertakings, including oil companies. Viability of the dedicated freight corridor project is dependent on relative costing of alternative means of transportation for the bulk users.

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