The Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) is said to have rejected a request from Tata Projects Ltd for a loan of a few hundred crores to complete the much delayed and crucial 102 km dedicated freight corridor stretch from Vaitarana to Jawaharlal Nehru Port in Maharashtra, as contractual issues threaten to breach the December 2024 deadline on a game changing infrastructure project.
The DFCCIL’s assessment is that the 1,506 km-long Western DFC linking Dadri in Uttar Pradesh with Jawaharlal Nehru Port in Maharashtra will be completed by December 2024 and that too if the contractual issues involving Tata Projects, the infrastructure unit of the diversified Tata Group, is sorted out quickly with the intervention of the Prime Minister’s Office (PMO), multiple sources briefed on the matter said, asking not to be named.
With its hands tied on taking “strong decisions” due to the “clout of the parties” involved in the contract, the DFCCIL has lobbed the ball to the Ministry of Railways and is said to have even sought the help of the PMO to find a solution to the issue.
From all angles, a solution looks tough for the parties involved.
The Express Freight Consortium led by Japan’s Mitsui & Co Ltd and comprising State-owned IRCON International Ltd and Tata Projects was awarded contracts by DFCCIL for civil and track works between Jawaharlal Nehru Port in Maharashtra and Makarpura near Vadodara in Gujarat, in 2016 and 2017.
The 422 km-long stretch was split into three packages – Tata Projects was given the contract for the 134 km stretch from Makarpura to Sachin in Gujarat, IRCON International got the 186 km long section from Sachin in Gujarat to Vaitarana in Maharashtra and Tata Projects won the 102 km long end stretch of the DFC from Vaitarana to Jawaharlal Nehru Port in Maharashtra.
IRCON International and Tata Projects will jointly carry out civil engineering work and lay tracks, using high-quality Japanese-made rails.
Mitsui & Co is the Project Management Consultant (PMC) for the entire 422 km stretch.
Till date, DFCCIL has commissioned just half of the 1,506 km long western dedicated freight line and is hoping to commission the stretch up to Vaitarana by December 2023.
But, from Vaitarana to Jawaharlal Nehru Port, it is anybody’s guess on the timeline for completion.
“This 102 km stretch has become the most troublesome part of the project,” said a government official involved in the implementation of DFC.
For close to a decade, the DFCCIL has been struggling with land acquisition and rehabilitation of project affected persons (PAPs) on the Vaitarana-J N Port stretch, besides other “restrictions” in Mumbai region. The final stretch has two tunnels, four via ducts and a rail flyover.
Land acquisition is now almost complete, barring a 1.5 km stretch.
Out of the 3,215 PAPs in and around Vasai, Virar, Dombivli and Bhiwandi areas, DFCCIL has rehabilitated 3,190 PAPs and the balance 25 have resorted to litigation.
Tata Projects was awarded the Vaitarana- J N Port section in March 2017 and per the contractual timeline, the work was supposed to be completed in 208 weeks (about 4 years) from the start of work, by March 2021.
The deadline was extended to March 2022 and is now slated for completion by December 2024.
Tata Projects has missed the deadline due to multiple issues including some vexed contractual issues, the government official said.
“The DFCCIL management is in a fix on what to do,” he said.
DFCCIL, according to this official, is said to have declined the loan request from Tata Projects.
“DFCCIL does not have the mandate to give loans to contractors, it can’t because the DFC itself is being funded through a loan from the Japan International Cooperation Agency (JICA). The loan is costly and has to be repaid,” he said.
Acting against Tata Projects by terminating the contract is also not an easy proposition for DFCCIL because the Indian firm is part of a consortium and also due to the sensitivities involved.
Since its a consortium, DFCCIL cannot single out Tata Projects for action as it will inevitably lead to litigation.
“If the Tata Projects contract for Vaitarana to J N Port is terminated, all the three consortium partners will be blacklisted. The responsibility is on all the three consortium members as they have an internal share in the profit but for DFCCIL, it is one entity and that is the Express Freight Consortium,” the official said.
Further, Mitsui & Co is a “big fish” in Japan while blacklisting IRCON International would be an embarrassment for the government.
“It is becoming a great source of agony for DFCCIL; terminating the contract will be very difficult,” the official said, adding that India is also using diplomatic channels to seek Japanese government’s help for completing the end section of DFC.
The consortium partners will likely approach the court against termination of contract and re-tendering will be held up if the court stays the termination.
Hence, terminating the contract and re-tendering the section will consume more time and likely delay the commissioning of the project to 2026 or beyond with attendant cost escalations.
“The DFCCIL management is looking at the last section very seriously. The Railway Ministry has been apprised of the situation. Finally, the management has to take a call on whether to terminate the contract, retender the work or get the work done somehow by Tata Projects through some out of the box thinking,” the official said.
A spokesperson for Tata Projects Ltd said,” We have completed 39 percent of the work and the delay was due to land acquisition and site encroachment concerns which occur in linear projects and are mostly beyond anyone’s control. We have not approached DFCCIL for any type of loan”.
The Vaitarana to J N Port stretch is critical for the DFC on two counts.
The government and DFCCIL have drawn flak for connecting Mundra Port- a private port and India’s biggest commercial port run by the Adani Group – to the DFC network first, much to the disappointment of State-owned J N Port Authority for the consequent impact on its container business at a time when private firms are investing thousands of crores to add capacity in India’s second biggest container gateway.
Any further delay in linking the end stretch of the DFC with J N Port will only add to the charge that Mundra Port has been given “favourable treatment” compared to J N Port.
The delay has led an exasperated Sanjay Sethi, Chairman, Jawaharlal Nehru Port Authority to say that “J N Port keliye jo DFC ka intezaar hai…..what do you say ….inteha ho gayi intezaar ki (the limit of waiting has been reached)”, he said, borrowing a line from a song in the Amitabh Bachchan starrer ‘Sharaabi’.
Sethi said that the completion target has been changing and is like a moving target after every few months.
Calling for a realistic target for completion of DFC, Sethi said: “Because, what happens is that we have been talking of private investments in the ports sector, particularly in J N Port. A lot of their business plans are aligned with this, are based on this. So, after some time it does become a credibility issue”.
“When we have signed concession agreements with private partners and want them to complete the projects on time due to government targets as part of the National Infrastructure Pipeline, they will turn around and tell us but ‘didn’t you say the DFC will come in this time’,” Sethi said.
The end mile stretch to J N Port is also critical for the full-scale commissioning of DFC.
“It is of no use if this section is not completed on time for commissioning the entire DFC. If you don’t have the last stretch which ends at J N Port, then what is the point,” a second source with knowledge of the matter said.
“DFC can run double stack container trains whereas the Indian Railways network is not compliant with double stack trains. So, the purpose for which the government is building the DFC will be defeated if DFCCIL is not able to run double stack container trains from end to end. Where will the trains be run,” he said.
Tata Projects, according to an industry source, is putting all its energy and focus on completing the new Parliament building, leaving the Vaitarana-J N Port section of DFC in limbo.
“It looks like the new Parliament building is more prestigious for Tata Projects than the DFC section in Maharashtra,” the industry source said.
DFCCIL is wary of how a termination of the contract for the Vaitarana- J N Port section will be perceived at the “highest political level”, he continued.
“These are very sensitive issues. DFCCIL is also bearing the brunt of the PMO because of the delay in commissioning the project,” he added. The Western DFC between Delhi and Mumbai will be the backbone of the Delhi Mumbai Industrial Corridor (DMIC) scheme, a joint initiative by the Japanese and Indian governments. In addition to reducing the load that is on the existing tracks, it will reduce the time required to move freight from Delhi to Mumbai from over three days at present to less than one day. This major improvement in logistical efficiency is expected to make a significant contribution to industrial development in India.
