The ambitious Dedicated Freight Corridor (DFC) project, targeting creation of high-capacity, high-speed railway corridors dedicated to freight movement, boasts of being India’s largest-ever infrastructure project. The Delhi-Mumbai and Delhi-Kolkata corridors, with an estimated completion cost of ~INR900bn, are expected to revolutionise freight transport in India. With a 2017-18 completion target, steady progress in land acquisition and funding, we expect the next couple of years to see a lot of action on the project award side. This will trigger significant opportunities for EPC players like L&T, IVRCL, NCC, among others, apart from giving a fillip to the country’s logistic network.
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DFC development imperative as existing network grossly clogged
Saturation of existing railway capacity has led to congestion and loss of freight market share for Indian Railways (from ~90% in 1950s to <40% currently). Development of DFCs with high-capacity efficient network, faster speeds and enhanced design features is likely to enable railways cope with the increasing freight transport requirements in a timely and cost effective manner.
Funding in place for ambitious INR900bn multi-phase project
DFC’s current scope is limited to ~3,300 kms on Delhi-Mumbai and Delhi-Kolkata routes. The project, to be undertaken in phases, is estimated to cost INR900bn. The construction cost can be broadly broken up into civil construction (65%), electrical work (20%) and the balance 15% for signaling (please refer interview with Mr. P N Shukla, Director for Operations & Business Devp., DFCCIL, on page 6 for more details). While Japan is funding the Delhi-Mumbai route, the Delhi-Kolkata route will be funded by the World Bank, Indian Railways and the PPP mode.
Land in place; project award to commence soon
Funding from multi-lateral agencies is contingent on achieving milestones like land acquisition etc. This is likely to ensure that execution issues usually associated with large infrastructure projects do not arise. As more than 60% of the land has been acquired, project award is set to begin. Contracts worth ~INR150bn are expected to be awarded over the next couple of months. With a 2017-18 completion date, we expect a steady stream of project award till 2014.
Outlook: Networked for growth; advantage EPC players
DFC is expected to have a multiplier effect on Indian Railways’ freight carrying capacity. It is a step in the right direction for lowering surface freight costs, which are 2-3x of those in developed countries. Near-term beneficiaries from DFC include EPC contractors like L&T (BUY/SO), NCC (BUY/SO), IVRCL (HOLD/SP), SADE (BUY/SO), HCC (HOLD/SP), Simplex (HOLD/SP), Gammon (Not rated), among others. Long-term beneficiaries include companies related with associated infrastructure like Texmaco, Titagarh Wagons, CONCOR, BEML, Siemens, Kalindee Rail Nirman etc.
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