Industrial Corridors- Driving Growth and Building the New India
Posted in Operations & IT Articles, Total Reads: 2596
, Published on 21 November 2014
Agriculture sector in India accounts to 58% of the employment but contributing only 14.2% of the GDP. This sector shows a constant growth of 3% but currently country demands a long-term growth of 9-10%. No country in the history has achieved a long term sustained growth backed just by its agriculture sector, and the need for long-term sustainable growth causes an extraordinary scale of urbanization in India. On an average in every one minute 30 Indians migrate from rural to urban cities. About 350 million Indians will move to urban cities by 2030, and this number will be doubled to 700 million by 2050, which is 2.5 times of USA’s present population. Existing cities might become slums by 2022 because of a huge influx of the rural population in urban cities and insufficient resources to hold that population. To avoid that, India needs to develop 500 new cities to accommodate the migrating population.
“Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world.”
Indian Government has a vision for developing a Multi-modal High Axle Load Dedicated Freight Corridor (DFC) between various cities such as Amritsar-Kolkata: connecting Punjab, Haryana,, Bihar, Jharkhand and West Bengal, Uttarakhand, Uttar Pradesh. Delhi-Mumbai: connecting Uttar Pradesh, Delhi, Haryana, Rajasthan, Gujarat and Maharashtra. Mumbai-Bengaluru: connecting Mumbai and Karnataka, Bengaluru-Chennai: Bengaluru, Andhra Pradesh and Chennai.
The Industrial corridor programme concentrates on infrastructural development of Smart Cities with the objective is to expand manufacturing and services base. Smart cities can be referred as entirely new cities which are built from scratch or existing cities by smart investments through technology and infrastructure. This idea started in the last decade when companies like IBM, Cisco promoted themselves as Building Smarter Cities through technology. Apart from developing industrial cities it also focuses in developing infrastructural linkages like energy system, water supply, transportation and logistics linkages.
It’s very important for India to grow at 9 to 10% for a very long period on a sustained basis, for at least three to four decades. Historically, this is been done by Japan, Singapore, later by Korea and Recently in China. If you look at all these countries, the Logistics cost is substantially lower than India. In India, it is as high as about 12.5 % of GDP, compared to 6-6.5 % in Japan. The vision lies in developing dedicated freight corridors between major cities along the golden quadrilateral. It will only carry container trains. It is the first container rail train which will happen in India. Under this project lies a sea of opportunities. It provides an opportunity to do new urbanization, also to move goods far more quickly into areas where’s there is consumption and to Indian ports for purposes of exports. Development of these corridors will lead to the development of new smart cities across India.
Delhi Mumbai Industrial Corridor project plans to develop 24 new cities under the purview of this project, and first 7 of them are expected to come up by 2018. The total expenditure is expected to be $100 Billion and Government of India along with Japan will contribute $10 Billion, and the rest will be contributed by the Private sector.
Delhi Mumbai Industrial Corridor(DMIC)
Amritsar-Kolkata corridor covers 20 cities of North India that has 40% of the country population. This corridor is ranges from 150-200 KMS on either side of the Eastern Dedicated Freight Corridor (EDFC) in different phases. The primary budget estimation for this project is Rs.5749 crore, to be completed in 15 years in different phases, by way of union governments’ budget support proposal. Proposed in 2011, this project has been approved in jan-2014.
Mumbai-Bengaluru corridor covers nine cities starting from Mumbai to Tumkur. The project is financed jointly by Indian and British governments. Government is expecting investments of 50 Million USD with creation of 2.5 Million jobs. Proposed in 2011, this project is currently in Planning stage.Proposed in 2011, currently this project is in the planning stage.
Bengaluru-Chennai corridor ranges from Bengaluru to Chennai covering a total of ten cities. The development of this project is planned with the assistance of JICA (Japan International Cooperation Agency) collaborating with three southern states. This will provide an excellent connectivity to Chennai port in the Bay of Bengal. Proposed in 2011, currently this project is in the planning stage, and the planning will be completed by Mar-2015.
Vizag-Chennai Project ranges from Vizag in Andhra Pradesh to Chennai. This a special package granted by central government to Andhra Pradesh state in AP state Reorganization Act. This project is proposed in May-2014 and currently it is in planning stage.
The central government announced to set up an Apex body for Expeditions and Implementation of Industrial Corridors i.e. National Industrial Corridor Authority (NICA). NICA will have verticals for each Industrial corridor such as Bengaluru-Chennai, Mumbai-Bengaluru, etc. NICA will create Special Purpose Vehicles (SPV) in 50-50 Partnership with states heading by the state officials to take care of municipal and regulatory authorities. The centre will be looking on financials and planning of the projects while the state focuses on implementation and regulators’. As the Delhi-Mumbai corridor is already under implementation state, it will not come under NICA; however NICA will be overlooking the DMIC project as well.
The biggest stumbling point that these Industrial Corridors will face is Land Acquisition before it comes to reality. An estimate suggests that projects worth Rs.6, 65,000 crores have been stalled due to land acquisition problems in the past decade. To overcome this challenge, the project has been structured in such manner where equities are given to the land owners, and by not looking at gross requirement of land but the next requirement of land, so that the trunk infrastructure can be created and the other transaction of lands which is owned by the private parties can be done directly through the farmers. In areas that have been identified, there is a substantial area of Government land available, waste land available, and there is adequate availability of water supply. There’s another big challenge which needs to be addressed i.e. getting the financial structure right. DMIC envisages a substantial investment from the private sector, but currently there are no instruments to raise long-term finance, and this can prove to be critical in such large scale project. Another thing that is critical to the success of this project is Cooperation between Indian states with different parties and different ideologies.
Most infrastructure plans in our country hasn’t moved as fast people might like to see it, but Industrial Corridor certainly is a game changer project simply because of the scale, and the kind of activities the corridor will eventually have are so diversified, that it does certainly have a game changer status. But the scale is so mammoth that the project will need reasonable time to come up and hence the execution will take place in phases. This project will boost the realty and infrastructure, because in India, unfortunately, unless there is a big project that is planned and implemented, supplementary infrastructure does not really come up. Overall in this corridor, infrastructure quality and provisions are going to improve which will develop the real estate industry as well.
The future is filled with infinite possibilities, and it is important that we capitalize on these opportunities. The industrial corridor is a good beginning, and a lot of things still needs to be done on every front. Corridors will pass through multiple states, and State governments are planning big to cash in on this opportunity. They will have new ports, international level airports, clean highways, smart townships, efficient logistic chains, cold storages and cargo handling facilities. The possibilities are endless and if the project gets successful it will provide a facelift for the whole country, and it will come with a multiplier effect i.e. the growth will be multiplied in every part of the country.
Narendra Modi Led NDA government has put great deal of emphasis on augmentation of manufacturing sector and expanding physical infrastructure. The central government has zeroed in on two places: Shendra Bidkin in Maharashtra and Dholera in Gujarat to develop them as first two smart cities out of the proposed 100 smart cities to be built under the Industrial Corridor plan. They will roll out the final plan of the two smart cities by the end of current financial year. The Government has also decided to create an apex body National Industrial Corridor Authority (NICA), which will have every corridor expect the DMIC under its purview.
This article has been authored by Himanshu Sachdeva and P. Dinesh Kumar from IIM Udaipur