Why in the News?

Dedicated Freight Corridors are boosting India’s GDP and significantly enhancing Indian Railways’ revenue, according to a recent study by Australia’s University of New South Wales.

What does the Australian varsity study say?

• Conducted by the University of New South Wales, this study used a Computable General Equilibrium model to assess the WDFC’s impact, specifically from FY 2019–20.
• The study’s findings include:
  • Reduced freight costs and travel times have decreased commodity prices by up to 0.5%.
  • The DFCs contributed to a 2.94% increase in Indian Railways’ revenue between FY 2022–23 and FY 2018–19.
  • Western regions gained significantly from reduced freight costs, which had a “social-equalizing effect,” benefiting states with lower per capita GDP.
• Published in Elsevier, the study integrated freight costs, industry inputs, population data, and rail and road data.

What economic benefits do Dedicated Freight Corridors (DFCs) bring to India?

• Improved Supply Chains: DFCs provide faster, efficient transit for freight, enhancing the supply chain for industries and logistics providers.
• Cost Savings: Reduction in freight transport costs lowers overall logistics expenses, which can lead to price reductions for consumers.
• Revenue Growth for Railways: DFCs have directly contributed to revenue increases, supporting the Railways’ finances.
• Increased Freight Share: The corridors are key to meeting the National Rail Plan’s target of achieving a 45% rail share in freight by 2030.
• Exports and Imports: Faster, dedicated freight routes boost export-import activities, as DFCs support port connectivity, particularly in the West.

How do DFCs enhance the overall logistics and transportation infrastructure in India?

• Decongested Rail Network: By shifting freight traffic off the main passenger routes (e.g., the Golden Quadrilateral), DFCs alleviate congestion, improving both freight and passenger rail reliability.
• Regional Development: States along the DFC routes experience increased industrial activity due to improved logistics support, which can enhance local economies and job creation.
• Future Corridors: Plans are underway for four additional corridors (East Coast, East-West I & II, North-South) to further expand the freight network, enhancing connectivity across the country.

Challenges related to the development of DFC: 

• Land Acquisition Delays: Acquiring over 8,800 hectares, often privately owned and developed land, has caused setbacks, with disputes and legal cases prolonging the process.
• Escalating Costs: Project costs have surged significantly, with Japan International Cooperation Agency (JBIC) noting that expenses have nearly doubled, raising concerns about financial viability and potential investor reluctance.
• Technology Disputes: Differences over locomotive technology—diesel versus electric—pose delays, as stakeholders like Indian Railways and JBIC debate environmentally friendly solutions.
• Utility and Infrastructure Challenges: Shifting utilities (power lines, water pipes) and constructing road overbridges and under-bridges add logistical complexities.
• Funding and Financial Management: Reliance on external funding and the need for efficient resource management impact project timelines and execution stability.

Way Forward: 

• Streamlined Land Acquisition and Cost Management: Need to implement a centralized framework for faster land acquisition and cost oversight to mitigate delays and prevent cost escalations, ensuring project feasibility and investor confidence.
• Technological and Funding Consensus: Need to establish clear technology standards (e.g., electric locomotives) for environmental benefits and secure diversified funding sources to reduce dependence on external financing, enabling timely completion and sustainable operations.

Mains PYQ:

Q “Investment in infrastructure is essential for more rapid and inclusive economic growth.” Discuss in the light of India’s experience. (UPSC IAS/2021)

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