PowerPoint Presentation

TOPICSStructuring the Dedicated Freight Corridor A Lost Opportunity A critique of various flaws in the project plan and financing

RURAL ECONOMY Infrastructure, Development and Financing Various projects, schemes related to rural infrastructure development and the mechanism of their implementation by the Government Structuring the Dedicated Freight Corridor A Lost Opportunity A critique of various flaws in the project plan and financing

SOURCE: STRUCTURING THE DEDICATED FREIGHT CORRIDOR PROJECT - A LOST OPPORTUNITYSobhesh Kumar Agarwalla G. Raghuram

DEDICATED FREIGHT CORRIDOR AN INTRODUCTIONA major investment is planned for rail transportation in India with two Dedicated Freight Corridors (DFCs) being constructedWestern Corridor: Nehru Port Trust (JNPT, near Mumbai) and Dadri (near Delhi)Eastern Corridor: Ludhiana and Dankuni (near Kolkata). The project is being managed by a Special Purpose Vehicle (SPV) called Dedicated Freight Corridor Corporation of India Limited (DFCCIL), under the Ministry of Railways (MOR)The project was conceptualized in 2005 and estimated to cost 28,000 crores in January 2007 with an expected duration of five years, it finally got underway in 2008. As per a revised deadline and scope set in 2009, this project was expected to be completed by 2016-17 at an estimated cost of 80,000 crores (MCA, 2011).

WHY DEDICATED FREIGHT CORRIDOR?The energy efficiency of rail over road and carbon impact clearly pointed in the direction of promoting increased share of rail transportThe railway freight traffic was projected to cross 1100 million tons by the end of the 11th Five Year Plan in 2011-12 (PC, 2007-12)The growing demand for increase in freight transport was putting additional pressure on the existing railway tracks which were also being shared with passenger transportThe PC and MOR envisaged that additional capacity will be required along the GQ with immediate priority on the Delhi-Mumbai and Delhi-Kolkata corridors

FEASIBILITYThe task force included experts and representatives from Railway Board, PC and Ministry of Finance (MOF). Immediately thereafter, in July 2005, MOR entrusted RITES* with the feasibility study of both the western and eastern corridors. It was interesting that the terms of reference also included the examination of whether the new corridors should be dedicated to freight or passengers, releasing capacity for the other in the existing corridorsWHY DEDICATED FREIGHT AND NOT DEDICATED PASSENGER ?The task force had provided the rationale as to why the corridors should be dedicated to freight rather than high speed passengers (CoI, 2006) : The investment requirement to build passenger corridors is five times that required for freight corridors

Simultaneously significantly heavy investments would be required to augment capacity on existing networks to cater to the freight business.

Even after these investments physical limitations imposed by the restrictive space envelope would remain

Investment for the dedicated high-speed passenger corridors would have relatively lower returns on capital, which the country can ill-afford.

GOLDEN QUADRILATREAL

ISSUES ADDRESSEDOwnership StructureRole and Market Access of DFCCILScope and DesignFunding Structure and PPPRevenue and Risk ModelContracting Strategy

OWNERSHIP STRUCTUREIn the Board Meeting of 26 February 2011, it was agreed to modify the CA so that the new railway (assets) would be owned by the MOR, which would grant a 40-year concession to DFCCIL since the entire land, funding and operational charges for the project were being provided by IR.The task force did not consider a third party ownership through an open competitive bid, a model that has been adopted in the roads, ports and airports sector. This could have brought in a stronger commercial and entrepreneurial energy into the project. However, to ensure that such parties would have had the appetite to fund the project and bear the risk, the project may have had to be unbundled into smaller segments like in road projects. Also, selecting partners through an open competitive bid has the benefit of greater due diligence in the definition of roles, relationship and contracts.

ROLE AND MARKET ACCESS OF DFCCILIn terms of access to market, the task force had envisaged that DFCCIL would move trains, while allowing non-discriminatory access to IR and other qualified operators within a regulatory framework. This got modified by the GOM to (i) IR operating the trains by providing the haulage while DFCCIL would only do the traffic control and (ii) IR being the sole customer and even if other qualified operators were to use the DFCs, it would happen through the IR.With IR playing the sole customer role, their motivation to perform on the revenue side and work towards many of the stated objectives would be lost. Thus the DFCCIL, although legally registered as a separate company under the Companies Act, for all practical purpose was operating as a separate arm of the IR

SCOPE AND DESIGN Apart from the construction of two corridors, the GoM recommended that (MOR (RB), 2006) :The SPV shall perform similar functions in respect of future phases of the DFCs, if any, including those connecting the other legs of the GQ and its diagonalsThe SPV shall have the status of a Railway Administration under the Railways Act, 1989 and shall exercise powers and discharge the responsibility for the functions assigned to it under the CAThe alignment had been generally kept parallel to existing lines except provision of bypasses at major densely populated cities, industrial belts and where it would be difficult to acquire land. Since the origins and destinations of traffic did not necessarily fall on the DFC, a number of junctions had been planned to transfer traffic from the existing IR Corridor to the DFC and vice versa.

DESIGN PARAMETERSThe draft business plan proposed that the design parameters of the new railway tracks would be different from the existing railway tracksBoth EDFC and WDFC had the same technical standards except for the vertical moving dimension. While the moving dimensions of the WDFC were being made for double-stack container operations (7.1 meters), those for EDFC were being made for single stack container operations (5.1 meters)The argument visibly was that significant container traffic would not be expected on the EDFC (whose primary cargo is expected to be coal), and hence it would be wise to save costs in terms of structures. The contention is that this appears to be a very short sighted policy, since it would be extremely difficult to anticipate future traffic flows beyond even ten years.

FUNDINGWDFC was to be funded by the JICAEDFC was to be funded through internal generation of funds, the World Bank, and PPPIt was proposed that EDFC would be funded by World Bank loan, internal generation (by IR) and PPP. Financing for the 725 kms section between Ludhiana and Mughalsarai will be undertaken over three phases by World Bank through a loan The Mughalsarai-Sonnagar (122 kms) section was being implemented with IRs resources and the Dankuni-Sonnagar section (534 kms, added later in 2009) was planned for execution through PPP mode15. As on June 2011, the final location survey was complete but the PPP model was yet to be finalized. (Indian Railways, 2011) The JICA funding had a 30% STEP component, implying that at least 30% of the total amount of contract had to be sourced from Japan

FLAWS IN CONTRACTING STRATEGYAs per the agreement with the (World) Bank in 2009, DFCCIL had agreed to adopt International Federation of Consulting Engineers (FIDIC) Conditions of Contract for Plant and Design-Build (Yellow Book) as the foundation for the bidding, contracting and implementation process. The Yellow Book requires the Contractor to participate in the design work. The essence of such contract was to promote design innovation by the bidders which will help reduce the overall cost through value engineering, especially for high cost components, like embankment and sleepers

RURAL ECONOMYINFRASTRUCTURE, DEVELOPMENT AND PLANNINGURBAN AREA - DEFINITIONFor the Census of India 2011, the definition of urban area is as follows:All places with a municipality, corporation, cantonment board or notified town area committee (called statutory town)All places which satisfies the following criteria, are called census town:A minimum population of 5,000At least 75% of the male main working population engaged in non-agricultural pursuits; and A density of population of at least 400 persons per sq. km.

Source: 1. A PDF file named 'Data Highlight' accessed on 11 April 2012 fromCensus of India, 2011; 2. India Market Strategy A research paper by Credit Suisse: 19/04/2012

RURAL AREA - DEFINITIONRural areas are also known as 'countryside' or a 'village' in India. It has a very low density of population. In rural areas, agriculture is the chief source of livelihood along with fishing, cottage industries, pottery etc. The quest to discover the real rural India still continues in great earnest. Almost every economic agency today has a definition of rural India.As per Census 2011, all areas which are not categorized as Urban area considered as Rural AreaNumber of Rural Units (or Villages) in India: Villages:Census 2001: 6,38,588Census 2011: 6,40,867 Increase: 2,279

POPULATION DISTRIBUTION2001(in crores)2011(in crores)Difference(in crores)India102.9121.018.1Rural74.383.39.0Urban28.637.79.1We find that 69.25% of Indias population is in rural areas.RURAL URBAN DISTRIBUTION OF POPULATION, Census of India 2011 accessed on 22/06/2013 from http://censusindia.gov.in/2011-prov-results/paper2/data_files/india/Rural_Urban_2011.pdf

18RURAL INDIARural India accounts for about 50 percent of Indias GDP and nearly 70 percent of Indias populationAbout 55 percent of manufacturing GDP is rural; nearly 75 percent of new factories built in the last decade were in rural areas, and rural factories account for 70 percent of all new manufacturing jobsPer capita rural GDP has grown faster than per capita urban GDP: 6.2 percent compound annual growth rate (CAGR) versus 4.7 percentNielsen estimates that the fast moving consumer goods (FMCG) market in rural India will hit US$100 billion by 2025, up from US$12 billion currently

SOURCE: STUDY BY ACCENTURE, MASTERS OF RURAL MARKETS: PROFITABLY SELLING TO INDIAS RURAL CONSUMERS, 2013 page no. 13

RURAL ECONOMYSince 2000, gross domestic product (GDP) has grown faster in rural India than in urban (at a 6.2 per cent compounded annual growth rate [CAGR] as against 4.7 per cent for urban). Studies revealed that between 2010 and 2012, spending in rural India was Rs. 3, 73, 566 crore (US$ 68.05 billion), while urban consumers spent Rs. 2, 97, 770 crore (US$ 54.25 billion). Improving business environment, better infrastructure and the growing number of consumers with higher disposable income are certain factors that are driving Indian rural markets.About one-third of fast moving consumer goods (FMCG) and consumer durables are sold in rural markets, according to a Tata Strategic Management Group report.

SOURCE: STUDY BY ACCENTURE, MASTERS OF RURAL MARKETS: PROFITABLY SELLING TO INDIAS RURAL CONSUMERS, 2013

RURAL INFRASTRUCTURERural infrastructure is not only a key component of rural development but also an important ingredient in ensuring any sustainable poverty reduction programme. The proper development of infrastructure in rural areas improves rural economy and quality of life.Rural development may be defined as structural changes in the socio-economic situation to achieve improved living standard of low-income population residing in rural areas and making the process of their development self sustained. It includes economic development with close integration among various sections and sectors; and economic growth specifically directed to the rural poor

RURAL INFRASTRUCTURETheMillennium Development Goals(MDGs) are eightinternational developmentgoalsthat were officially established following theMillennium Summitof theUnited Nationsin 2000, following the adoption of theUnited Nations Millennium Declaration. All 189 United Nationsmember stateshave agreed to achieve these goals by the year 2015. The 8 goals are:Goal 1: Eradicate extreme poverty and hungerGoal 2: Achieve universal primary educationGoal 3: Promote gender equality and empower womenGoal 4: Reduce child mortalityGoal 5: Improve maternal healthGoal 6: Combat HIV/AIDS, malaria and other diseasesGoal 7:Ensure environmental sustainabilityGoal 8: Develop a global partnership for development

SOURCE: http://www.undp.org/content/india/en/home/mdgoverview/ - UNDP website accessed on 22/06/2013

STEPS BY GoIBharat Nirman is a business plan for rural infrastructure which was implemented by theGovernment of Indiain order to provide some basic amenities to rural India. Bharat Nirman was launched by the Government of India in 2005.The UPA Government has launched Bharat Nirman time bound business plan for action in rural infrastructure for next four years. Under Bharat Nirman, action is proposed in the following areas:Rural Water SupplyRural HousingRural RoadsRural ElectrificationRural Telecommunication ConnectivityRural SanitationThe goals and timelines given by the government are explained in the following table.

SOURCE: http://www.bharatnirman.gov.in/ accessed on 20/06/2013

SchemeGoals by 2009Goals by 2012Goals by 2014Rural Drinking WaterProvide safe drinking water to all the under developed areas in India by 2012Rural Housing60 lakh houses to be constructed for the poor within the year 2009Plan has been extended to 2014 and the targeted house to be constructed has been increased to 1.2 crore.Rural TelecommunicationProvide broadband coverage to all the 2.5 lakhPanchayatsby the year 2012To cover 40% of the rural area withtelecommunicationfacilities by the year 2014Rural RoadsTo construct all weather roads by the year 2012 in order to connect all the villages of India having a minimumpopulationof 1000 Rural ElectrificationTo provideelectricityto every village by the year 2012Rural IrrigationTo provide an additional one crore hectare of irrigational land by the year 2012RURAL WATER SUPPLYCentrally Sponsored Scheme of Accelerated Rural Water Supply Programme under implementation since 1972-73 which is funded on a 50% matching share basis between the Government of India and the State GovernmentTo enable the rural community to shoulder responsibility in management, operation and maintenance of water supply systems at village level, decentralized, demand-driven, community-managed approach has been adoptedTo further strengthen community participation in the drinking water sector the National Rural Drinking Water Quality Monitoring & Surveillance programme was launched in February, 2006 under which 5 persons in each Gram Panchayat are to be trained to carry out regular surveillance of drinking water sources for which 100% financial assistance including water testing kits, are providedRIGHT TO WATERSOURCE: http://www.indianexpress.com/news/draft-bill-seeks-right-to-water-25-litres-daily-for-each/1133475/1The Centre on 24/06/2013 unveiled the draft of its contentious National Water Framework Bill which seeks to provide "right to water"Every individual has a right to a minimum quantity of potable water for essential health and hygiene and within easy reach of the household. The minimum quantity of potable water shall not be less than 25 litres per capita per day states the draftThe state's responsibility for ensuring people's right to water shall remain despite corporatization or privatization of water services, and the privatization of the service, where considered necessary and appropriate, shall be subject to this provisionThe draft bill gives it the flexibility of roping in a "private agency" for "some of the functions of the state". In this context, it stipulates that "allocation and pricing" should be based "on economic principles to ensure its development costs"An independent statutory water regulatory authority shall be established by every state for ensuring equitable access to water for all, and its fair pricing for drinking and other uses such as sanitation, agricultural and industrial

RURAL HOUSINGThe rural housing programme is implemented by the Ministry of Rural Development through the Indira Awaas Yojana scheme, which is a centrally sponsored scheme where the cost is shared between the Centre and the States on a 75:25 basisThe criteria adopted for allocation of financial resources between the States/UTs gives greater emphasis to the states with higher incidence of shelterlessnessThe implementation guidelines of the scheme specifically target the rural below poverty line (BPL) households. The selection of beneficiaries is done by the respective Gram Sabha from the BPL list and no higher approval is requiredAn important requirement in the implementation is that at least 60% of the beneficiaries should belong to the SC/ST communities. The objective of alleviating the lot of the underprivileged members of society is built into the scheme guidelines. The IAY scheme also lays emphasis on individual sanitation and health by incorporating the cost of a sanitary latrine and smokeless chulha into the grant

RURAL ROADSThe Ministry of Rural Development has the responsibility of ensuring that every habitation over 1000 population and every habitation with more than 500 in hilly and tribal areas is connected with an all-weather roadThis work which is being undertaken under the Pradhan Mantri Gram Sadak Yojana since 2000The concept of core network has been operationalized to focus on those set of roads, which are considered essential to provide connectivity to all habitations of the desired size. The Core Network is the basic instrumentality for prioritization of construction and allocation of funds for maintenanceA district and rural roads plan has been prepared listing out complete network of all roads in the district that has village roads, major district roads, state roads and national highways

RURAL ELECTRIFICATIONAndhra Pradesh, Goa, Delhi, Haryana, Kerala, Punjab, Gujarat, Karnataka, Pondicherry, Lakshadweep, Tamilnadu, Daman & Diu, Dadra & Nagar Haveli, Chandigarh are the regions with 100% rural electrificationSome schemes related to rural electrification under Central Government are:Pradhan Mantri Gramodaya Yojna (PMGY) Kutir Jyoti Program (KJP) Minimum Needs Program (MNP)Accelerated Rural Electrification Program (AREP) Rural Electricity Supply Technology Mission (REST) Rajiv Gandhi Grameen Vidyutikaran Yojna

SOURCE: http://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_power1904.pdf, 2011-12 accessed on 22/06/2013

JYOTHI GRAM YOJANA AN EXAMPLEGujarat State Government sponsored schemeInitially, the scheme started with peoples participation. Afterwards, Government has decided to give 100 % grantAn innovative scheme to make available 24 hours three phase quality power supply to Rural areasFeeders having Specially Design Transformers to supply power to farmers residing in scattered farm housesGujarat Government launched the scheme in September 2003 with an objective to segregate the agriculture load from residential, industrial and commercial loads. The idea was to separate agricultural load from residential and industrial load also lead to improved transparency in the working of electricity board and decreased the possibility of power theft, as explained by Prof. Sebastian Morris in the seminarSOURCE: http://guj-epd.gov.in/epd_jyotiyojna.htm - Department of Energy and Petrochemicals, Government of Gujarat, accessed on 22/06/2013

ADVANTAGES OF JYOTHI GRAM YOJANAPromotion of industrial and commercial activities in villages leading to local employment generation;Buoyant revenue through prevention of power theft.Improved standards of living in rural areas on account of access to a wide variety of goods and instruments;Enhanced exposure of rural population to different parts of the world through electronic media, leading to updating of knowledge avenues;Impact on quality of education;Improved of health services and sanitation facilities;Reduction in migration from rural areas to urban areas.Regulated but improved quality power supply to agriculture enabled efficient and optimum use of water, which in turn contributes to conservation of ground water resources.Speedy restoration of power supply due to parallel network in case of disruption.Potential for replication in other States.

RURAL TELECOMMUNICATIONThe Department of Telecom in the Ministry of Communications and Information Technology has the responsibility of providing telephone connectivity to the 66,822 villages that remain to be coveredThe Government is committed to expanding rural connectivity through a slew of measures so that rural users can access information of value and transact business. This will include connecting block headquarters with fiber optic network, using wireless technology to achieve last mile connectivity and operating information kiosks through a partnership of citizens, panchayats, civil society organizations, the private sector and Government, effectively making it a potential addition to follow the PPP model

RURAL TELECOMMUNICATIONTelecom Subscribers (Wireless+ Wireline) as on 31/12/2012Total Subscribers895.51 millionTeledensity73.34 %Urban Teledensity149.90 %Rural Teledensity39.85 %SOURCE: The Indian Telecom Services Performance Indicators October - December, 2012; Published on 06/05/2013; accessed on 22/06/2013 from http://www.trai.gov.in/WriteReadData/PIRReport/Documents/Indicator%20Reports%20-%20Dec-12.pdf

RURAL SANITATIONSOURCE: http://indiasanitationportal.org/category/category/policies-and-programmes/central-rural-sanitation-programme-crsp accessed on 21/06/2013Total Sanitation Campaign(TSC) orNirmal Bharat Abhiyan(NBA) is aCommunity-led total sanitationprogram initiated byGovernment of Indiain 1999. It is a demand-driven and people-centered sanitation programThe main goal of Total Sanitation Campaign is to eradicate the practice of open defecation by 2017. Community-led total sanitation is not focused on building infrastructure, but on preventing open defecation through peer pressure and shameTotal Sanitation Campaign provides the following guidelines to improve rural sanitation:School Sanitation and Hygiene Education: widely known as SSHE, is a comprehensive programme to ensure child friendly water supply, toilet and hand washing facilities in the schools and promote behavioral change by hygiene education Community Sanitary ComplexAnganwadi toilets supported by Rural Sanitary Marts (RSMs) and Production Centers (PCs)

PROVISION OF URBAN AMENITITES IN RURAL AREAS (PURA)Conceptualized by ex-President, Dr. Abdul KalamMinistry of Rural Development (MoRD), Government of India has launched the scheme Provision of Urban Amenities in Rural Areas(PURA) as a Central Sector scheme during remaining period of the XI Five Year Plan.MISSION:Holistic and accelerated development of compact areas around a potential growth centre in a Gram Panchayat (or a group of Gram Panchayats) through Public Private Partnership (PPP) framework for providing livelihood opportunities and urban amenities to improve the quality of life in rural areasMoRD with support from Department of Economic Affairs and the technical assistance of Asian Development Bank intends to implement the PURA scheme under a Public Private Partnership (PPP) framework between Gram Panchayat(s) and private sector partners. The scheme envisages twinning of rural infrastructure development with economic re-generation activities and is the first attempt at delivering a basket of infrastructure and amenities through PPP in the rural areas. It is an effort to provide a different framework for the implementation of rural infrastructure development schemes and harness private sector efficiencies in the management of assets and delivery of services.SOURCE: http://pura.net.in/content/about-pura ; Department of Rural Development website, accessed on 22/06/2013

RURAL WAREHOUSINGSchemes and subsidy currently being implemented by Government of India to improve rural warehousing:Gramin Bhandaran Yojana/Rural Godown SchemeScheme for Development / Strengthening of Agricultural Marketing Infrastructure, Grading and StandardizationEstablishing Agri Clinics and Agri Business Centres(ACABC) by Agriculture GraduatesCapital Investment Subsidy Scheme for Construction/Modernization/Expansion of Cold Storages and storages for Horticulture Produce

RURAL WAREHOUSINGThe main objective of the scheme is creation of scientific storage capacity with allied facilities in rural areas to meet the requirements of farmers for storing farm produce, processed farm produce and agricultural inputs; promotion of grading, standardization and quality control of agricultural produce to improve upon their marketability; prevention of distress sale immediately after harvest by providing the facility of pledge financing and market creditThe Warehousing Development and Regulatory Authority (WDRA) proposed a new idea, as depicted by the following slide, which is beneficial for both farmer(through a means to store his produce till shortage occurs) as well as the Government (by reducing wastage and improving the storage of food products that can be used in drought periods)

SOURCE: https://www.sbp.co.in/agri/Scheme%20for%20constructionRennovationExpansion%20of%20Rural%20Godowns.pdf accessed on 24/06/2013 http://forbesindia.com/article/briefing/indias-new-warehouses/27232/1, accessed on 24/06/2013

STEP-4

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SOURCE: http://forbesindia.com/article/briefing/indias-new-warehouses/27232/1, accessed on 24/06/2013

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