Saturday, March 23, 2019


Arvind Agarwal
Google Drive
Nov 19, 2017
DELHI MUMBAI INDUSTRIAL CORRIDOR
- a critical look at progress to date

Decade after the Manmohan Singh government announced the $90-billion Delhi-Mumbai Industrial Corridor, work has started rolling and pace has quickened markedly in the last 18 months. MMS govt and Congress were the cause of most of the delays and missteps. For example Sachin Pilot disrupted Rajasthan state assembly to stop a land acquisition enabling legislation, indicating he was against any land acquisition whatsoever!! Why announce plans just to waste time and money afterwards?!

If it was not for the Japanese, the project would have died a death long ago. Not surprisingly situation improved after a change in Central and State governments. After a quiet period when reports were filed and legislation was amended, action is being seen on the contracting side. Companies involved in building trunk infrastructure facilities, administrative buildings, sewage plants and water treatment facilities are doing bumper business.

Plans to build gas power plants were dropped by the incoming NDA govt. A lot of preparation had been done by MMS govt including permissions, public meetings, land acquisition, gas supply arrangement, etc. They assumed sufficient domestic gas would be available and higher imported gas prices could be passed on to customers. But power tariffs are all-important to investors, and final price was just too high. Hence all gas power projects were abandoned.

Japanese interest has picked up since JBIC took 26% stake in DMIC development corporation. There is talk that $10 billion will be invested by Japanese businesses especially in Gujarat. Japanese had insisted on solar power for their industrial zone at KBN IC, Rajasthan. They were willing to pay high tariff for assured 24X7 power! 1MW micro solar plant along with 2MW generator backup was built for them. Japanese firms Hitachi and Sharp donated equipment to showcase their technology! A 5MW solar plant at Neemrana was also completed as early bird project.

Govt is being accused of diluting its support for DMIC. Allocation to industrial corridors was doubled to Rs1000cr, but this will now be shared with 4 other corridors. DMIC DC may not receive Rs17,500cr as planned, but it is not a setback. DMIC DC develops parcels of land in phases over 15-25 years, so it needs small sums. Moreover it does not pay for land and earns much more than it spends from monetising leases. Now that Dholera SIR and Noida IR are mature, enquiries are coming from large tenants. This will hasten the pace of work in investment zones. Lastly, $5B JICA funds have not been touched, but will likely get used for 2 metro-rail projects in Haryana and Gujarat.

Concerns were raised about tardiness in some zones, freight railways and land problems in later phases. Nangal Chaudhary IMMLH in Rewari was earmarked as an early bird project in 2010. Only now has land acquisition by Haryana govt started. Project is late but not stuck. Gurgaon to Bawal MRTS was envisaged in 2010. DPR was approved in Feb 2017. Haryana govt is acquiring land, but since finance is in place, work can start promptly. MRTS has become elevated and land requirement is very little. Master plan of Manesar-Bawal IR in Haryana was notified in 2012. Incoming BJP govt felt obligated to re-examine the plan and approved it in 2015-16.

Dighi Port IZ in Maharashtra serves as a key deepsea port. Dighi port is suffering from low useage due to poor connectivity. Development in IZ has been stalled until enough contiguous land (250sqkm) is acquired. 1500-km Western Dedicated Freight Corridor has progressed at snails pace since its approval in 2008. Work will now gather speed: 40% of route-kms and 12 major bridges were contracted in 2015/16, and all contracts were tendered till date. While the completion date is now 2019, one 970km signaling and telecom works contract has a finish date of 2022 — or 6.5 years from Jan 2016. Will this delay the start to 2022?

Master plan of an investment zone is divided into phases. This can cause a disaster if trouble in a later phase disrupts earlier developments, creates isolated patches without inter-linkages to surrounding areas or affects proper execution of the Master plan. In Dholera SIR court has stayed land acquisition after villagers petitioned it. It happened after 280sqkm out of 900sqkm had already been developed, but it is not a major setback as higher courts (esp Supreme Court) mostly take a pro-development stance, though project will get delayed and evictees may extract additional relief.

DMIC justifies use of phases in its project brochure saying, “Since the entire trunk infrastructure cannot be implemented in a one go, a phased approach is adopted. An activation area of 22.5 sq. Km has been identified which would act as catalyst for further investments and will provide a base for taking up development of further phases. Activation area is envisaged to trigger developmental activities in Dholera SIR and attract local and global investments. The area shall also help build confidence in the market for attracting anchor tenants thereby paving the way for development of remaining part of Dholera SIR.”

More criticism here: http://www.epw.in/journal/2017/44/commentary/delhi–mumbai-industrial-corridor.html

Brief counterpoints:
1. Centre is developing 5 economic corridors. Govt has given all regions a fair chance. State govts can develop other parts, perhaps through industrial policy, infrastructure or through good connectivity with high growth zones.
2. Investors are paramount. They demand best of facilities, transit, land, workers, etc and also demand a competitive milieu. For example Japanese know what they want and expect these to be provided.
3. Industry gravitates to best locations. Good planning helps to set up successful clusters. Cluster approach is about creating synergies — like common infra, pool of skilled workers and reduced logistics.
4. If corridors provide high growth, import substitution and employment growth then the purpose will be served.
5. Logistic parks, airports, railways and roads also benefit local population centres through reduced congestion and faster connectivity.
6. Priority is to attain successful economic zones. Indians are resilient enough to extract benefits for themselves. Govt can redistribute employment by relocating ministry staff and PSUs units. For example Bihar received 2 large Railway loco factories.
7. Urbanisation is an inevitable consequence of corridor development. Smart cities development benefits ordinary citizens in so many ways, eg good amenities, heathy environment, lower cost utilities, more digital aids, better law & order, etc.
8. Organised jobs pay higher wages and better benefits. Formalisation helps to reduce poverty and improve access to bank finance.
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