Dedicated Freight Corridor Corporation of India Limited
This summary covers a proposed investment by financial institutions yet to be identified (the Guarantee Holders) to provide a non-shareholder loan to the Dedicated Freight Corridor Corporation of India Limited (DFCCIL), an Indian state-owned enterprise, to complete the financing, design and construction of the Ludhiana-Khurja and Kanpur-Mughalsarai sections of the Eastern Dedicated Freight Corridor (EDFC), and the last mile connectivity between the freight corridor and multimodal logistics terminals (“the Project”). The MIGA-covered loan will be concomitant with US$245 million of World Bank financing to the Project under the Rail Logistics Project (P177856) currently under implementation.
Overloading of the Indian Railways (IR) system has been an imminent issue. As freight trains are being imposed into an already busy track schedule that is prioritized for passenger trains, freight service quality has been compromised as a result. The EDFC will operate in parallel to the existing IR system in eastern India and will be dedicated solely for the carriage of freight. The operation of the EDFC is expected to relieve the IR system of its overloading, as a major portion of the rail-freight transport in eastern India is expected to be transferred to the EDFC. The EDFC is also expected to catalyze a modal shift of freight transport from road to rail in eastern India.
The MIGA guarantee is requested for up to US$200 million of loan principal, future interest and potentially MIGA premium, for a term of up to 15 years against the risk of Non-Honoring of Financial Obligations by a State-Owned Enterprise (NHFO-SOE).
The Project is expected to yield positive development benefits by shifting freight transport from IR to EDFC and encouraging a freight modal shift from road to rail by making freight transport through EDFC more efficient and less expensive. The transfer of freight trains from the existing IR network to the high-standard infrastructure of EDFC will allow for better commercial speeds, larger trains and fewer intermediate stops. By shifting heavier freight traffic from IR to EDFC, the Project will also alleviate congestion in the former, with higher quality of service for passenger trains.
The MIGA guarantee will help DFCCIL to borrow internationally under commercial terms for the first time and thereby diversify its loan portfolio. This could provide a positive demonstration effect for a new financing model that could be replicated to fund other projects by DFCCIL or other state-owned enterprises in India.
MIGA’s support for the Project is consistent with the MIGA’s FY21-23 Strategy and Business Outlook, as well as with the World Bank Group’s Country Partnership Framework for India FY18-FY22, with MIGA helping to leverage private financing through its credit enhancement instrument. The Project is aligned with the Government of India’s National Rail Plan Vision 2030 and supports India’s National Determined Contributions for the period 2021 to 2030 targeting a reduction in the emissions intensity of its GDP by 45% from the 2005 level by 2030.