$245 Million World Bank Loan For Indian Railways To Modernise Logistics Infrastructure

Extending support to the modernisation efforts of Indian Railways, the World Bank has approved a $245 million loan to support India’s initiatives to modernise rail freight and logistics infrastructure.

The World Bank's rail project assumes significance as recently the national transporter has assigned the bank to carry out an analysis of rail network impact in Indian Railways with increased volume of freight and passenger traffic and also speed of goods and passenger-carrying trains.

The ongoing World Bank study will determine likely impact on capacity with increased speed and also determine likelihood of semi high-speed corridor on Delhi-Mumbai and Delhi-Howrah routes which have already been identified for increasing the speed potential for semi-high speed level, that is 160 kmph.

The rail logistics project will help India shift more traffic from road to rail, making transport — both freight and passenger — more efficient and, reduce millions of tonnes of greenhouse gas emissions (GHG) each year. The project will also incentivise more private sector investment in the railway sector.

Indian Railways is the fourth-largest rail network in the world having transported 1.2 billion tonnes of freight in the fiscal year ending March 2020. Yet, 71 per cent of India’s freight is transported by road, and only 17 per cent by rail. Capacity constraints of IR have limited the volumes and reduced the speed and reliability of shipments. As a result, IR has been losing market share to trucks over the years; in 2017-18, its market share was 32 per cent, down from 52 per cent a decade earlier.

Road freight is the largest contributor to GHG emissions, accounting for about 95 per cent of emissions of the freight sector. Trucks also accounted for about 12.3 per cent of road accidents and 15.8 per cent of total road transport-related deaths in 2018.

Rail emits about one-fifth of trucks’ GHG emissions, and with IR planning to become a net-zero carbon emitter by 2030, it has the potential to eliminate 7.5 million tonnes of carbon dioxide and other greenhouse gases each year.

“While reducing greenhouse gases, the new project will also benefit millions of rail passengers in India as railway lines get decongested with freight moving to dedicated lines,” said Hideki Mori, operations manager and acting country director, India, World Bank. “Integrating railways with the wider logistics ecosystem is also key to reducing India’s high logistics cost, which are much higher than in developed nations. This will make Indian firms more competitive.”

The rail logistics project will strengthen India’s multimodal transport hubs and terminals, by improving rail links with ports and inland gateways, and building first- and last-mile connectivity to railways.

The new Eastern Dedicated Freight Corridor-3 (EFDC), also supported by the World Bank, is already helping faster and more efficient movement of raw materials and finished goods between the north and eastern parts of India. The rail logistics project will connect several other such infrastructure projects and bring in private sector efficiency to augment rail capacity, create and manage intermodal terminals, and improve service quality and value-added services through private train and terminal operators.

A major focus of the project will be on harnessing commercial financing by engaging the private sector and developing customer-oriented approaches. The project will also support institutional capacity strengthening of the Dedicated Freight Corridor Corporation of India Limited (DFCCIL) as a commercial organisation and equip it to provide multimodal logistics services.

“India is increasingly focused on multimodal transport, particularly with railways as the central pillar of efficient logistics in the freight transport segment,” said Saroj Ayush and Martha B Lawrence, World Bank task team Leaders for the project. “The project will help leverage private sector efficiency for integrating rail transportation into cargo supply chains.”

The project places special emphasis on tackling gender-based violence and will support regular awareness drives for the community on the issue. It will also undertake activities to systematically improve women’s entry and transition in the railways sector, including improving women’s presence in technical job roles; creating safe workplace environments for contracted women employees and informal women workers; and prioritising childcare for informal women workers at construction sites.

The $245 million loan from the International Bank for Reconstruction and Development (IBRD) has a maturity of 22 years, including a grace period of seven years.