The Hindu Business Line : Tread cautiously on freight corridor project: McKinsey

According to a McKinsey study, a freight corridor is a complex project and, given the experience of other railways, optimised linkages with the existing network, technical configuration, economics, timely and innovative project execution and tight financial discipline are essential for it to succeed.

GIVEN the experience of other countries in dedicated rail freight corridors, the Government needs to tread cautiously before embarking on a project of this magnitude, points out a study.

The Delhi-Mumbai and Delhi-Kolkata routes are estimated to cost Rs 22,000 crore.

According to a McKinsey study that calls the proposed dedicated freight corridor "an ambitious project by global standards," the key criteria for evaluating the project should be timely and innovative project execution, tight financial discipline, optimised linkages with the existing network and synergy of operations across old and new network.

The Government plans to construct a dedicated rail freight corridor along the Golden Quadrilateral. Initially, the Government plans to raise about Rs 22,000 crore as soft loan from Japan for constructing the tracks between Delhi and Mumbai (Rs 12,000 crore) and Delhi and Kolkata (Rs 10,000 crore). RITES — the consulting arm of the Railways — has been asked to carry out a study on the corridor.

On the dedicated freight corridor project of the Netherlands, the consulting firm points out why strict discipline in each aspect of such large-scale projects needs to be maintained.

The Betuweroute (the Netherlands) project has demonstrated the dangers of underestimating a dedicated freight corridor project.

The project was conceived of since hinterland transport from the port of Rotterdam (Netherlands) was projected to grow at an unsustainable pace.

Thus, there was a decision to build a 160 km dedicated freight railway from Rotterdam to the German border.

The project — expected to be built with an estimated cost of euro 2.1 billion with half of the finance being raised from private parties — was to be completed by 2005, in a timespan of eight years starting 1997.

However, the project now has had a time overrun of at least two years and significant cost-overrun with expenses till date already at euro 4.8 billion, said the study. Moreover, the German leg of the corridor has not been constructed since it is economically unviable.

The problem now is that the dedicated freight corridor has had no impact on the turnaround times because of integration issues. Moreover, as alternative modes of transport became more competitive (with 40 per cent reduction in unit cost), the projected traffic is not materialising.

However, the German example of NETZ 21 is an example of a well-planned, dedicated freight corridor.

In this project, standardised infrastructure layouts were defined and applied to the whole network, points out McKinsey.

Moreover, it was fully integrated with the existing Deutsche Bahn network and systems. In terms of planning, priority network was built for high-speed passenger trains and for freight corridors. Moreover, there were separate networks with mixed traffic for trains with different speeds.

While finalising the network configuration, it is important to keep the long-term demand patterns and routes. Also, the nature of traffic has to be anticipated — whether it would be used primarily for transporting finished goods or for minerals.

Moreover, it remains to be seen whether the network would be used for point-to-point transportation or for hub and spoke routes.

Then comes the important issue of the extent of linkage with existing networks and the feeder route configurations — would they be rail or road routes and how will they be integrated with the corridor?

The firm says that a freight corridor is a complex project and, given the experience of other railways, a robust business case that includes network configuration, technical configuration, economics, project execution approach, and operations and maintenance, is essential for it to succeed.

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