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New Delhi: The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved the nearly threefold increase in cost to build the eastern and western dedicated freight corridor (DFC) project, a key infrastructure project that will increase Indian Railways’ freight carrying capacity and cut transportation cost for companies.

The revised cost estimate is 81,459 crore and will include land costs and financing plan.

The original cost estimate was 28,181 crore and was approved by the Congress-led United Progressive Alliance in 2008.

The 1,839km eastern corridor will connect Ludhiana in Punjab and Dankuni in West Bengal.

The 1,499km western corridor will connect Jawaharlal Nehru Port near Mumbai to Dadri in Uttar Pradesh.

“The original estimate was about 28,000 crore in 2007-08, close to about eight year ago. It was done by the UPA (United Progressive Alliance) government but no follow up was done. What is important is that this project will reduce unit cost of transportation, expedite commercial activity, benefit powerhouses, mines, ports, rail and industry," said Union telecom minister Ravi Shankar Prasad, while briefing reporters after the cabinet meeting.

The freight corridor was mooted in 2005 by the UPA government to decongest the over-saturated existing trunk routes of Howrah-Delhi on the eastern corridor and Mumbai-Delhi on the western corridor, and also to create freight capacity to move coal, speed up infrastructure construction and improve trade.

The project cost has seen a significant cost overrun on account of delays.

The special purpose vehicle of the railways Dedicated Freight Corridor Corp. of India now wants to complete the construction of the two corridors by 2017-18.

“Delays in DFC have been on account of land acquisition and handling of contracts and delay in decision making. While land acquisition can be challenging, delays on account of the latter should be checked as this affects the viability of even good projects. This is seen commonly in public projects," said Abhaya Agarwal, partner at EY Llp who oversees the infrastructure sector.

These projects, according to railway minister Suresh Prabhu, is important to improve the financial health of Indian Railways.

“The Eastern DFC is expected to carry 153 million tonnes (mt) of traffic in 2021-22, which will increase to 251 mt in 2036-37. The Western DFC is expected to carry 161 mt of traffic in 2021-22, which will increase to 284 mt in 2036-37," said a government statement.

Both the corridors are being financed through loans from multilateral agencies. World Bank has committed US $2.725 billion for the eastern DFC and Japan International Cooperation Agency (JICA) has committed 550 billion yen (around ) for the western DFC.

Of the 81,459 crore, 5,2347 crore will flow from debt from JICA and World Bank, 23,796 crore will be the equity requirement from the railways, which includes the cost of land and 5,316 crore will be the interest due on the debt, the government statement said.

So far, civil construction contracts and other contracts for about 1,526 km on the two corridors and 54 bridges on the western DFC have been awarded for 20,000 crore, the statement said.

In other decisions, the cabinet approved the renewal of long-term agreements with Japanese and South Korean steel mills to supply high-grade Indian iron ore for a three-year period from April 2015 to March 2018.

“The quantities covered under the agreement will be in the range of 3.8 mt to 5.5 mt per year, and will be supplied primarily from the mines of the National Mineral Development Corp. (NMDC). The contract will be executed by the Metals and Minerals Trading Corp. of India Ltd (MMTC) under the department of commerce," said an official statement.

India has been suppling iron ore to Japan and South Korea at least for the past four decades.

The cabinet also approved a cooperation pact between the department of industrial policy and promotion and the Japan Patent Office (JPO), ministry of economy, trade and industry, Japan. “The purpose of MoC (memorandum of cooperation) is to establish a framework for bilateral cooperation in the field of Industrial Property (IP), with emphasis on capacity building, human resource development and awareness generation," a government statement said.

The CCEA also provided financial support to state-owned Artificial Limbs Manufacturing Corp. of India (ALIMCO), Kanpur, by approving conversion of 52.14 crore interest on bank loans into equity.

Set up in 1972, ALIMCO has manufactured and distributed various types of cost-effective quality assistive devices to approximately 4.2 million people with disabilities PwD) so far. It currently, on an average, serves around 200,000 PwDs every year.

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