Roads, rail and the development of ports spell a new age for the industrial sector in UP. The journey however has only just begun, as Peter Cunningham reports
As the balance of manufacturing and production power shifts increasingly east towards the dynamic centres of India and China, it is becoming more evident that these two nations are vying with each other for supremacy. In order to increase competitive viability in this fierce skirmish, Uttar Pradesh (UP) realises that it will need a well-connected transport and logistics grid both for receiving raw materials and for exporting finished products. The preparations for this new reality come back, inevitably, to infrastructure and new developmental initiatives such as the freight corridor.
The challenge is simple: to beat China as an economic powerhouse a global manufacturing hub is needed. This is a tough challenge given the fact that manufacturing only accounts for 15 per cent of the gross domestic product in India, compared to China’s 30 per cent. The stark reality is that no developing Asian country has yet risen to middle-income status with figures so low. This fact alone is perhaps the underlying reason why Prime Minister Narendera Modi has been repeatedly emphasising his Government’s ‘Made in India’ campaign since its launch in September.
As a nation, India displays excellence in discrete pockets of high-tech manufacturing as global car giants Ford and Hyundai both run state of the art production centres in the country. However in manufacturing where it counts most, in the areas of lower skilled, and labour-intensive industries, India does less well. Ironically, this is where the window of opportunity is as estimates show 12 million new jobs will be needed every year until 2030 to absorb the demographic blessing India has: a wealth of young people.
Export-led manufacturing remains UP’s best economic hope for the future however seismic shifts to the way things are done will be required including a change to the outmoded labour laws and a redrafting of the land acquisition regulations. To succeed cheap labour is a prerequisite and India has this in spades. The killer advantage however will be in the efficiency and effectiveness of the logistics network and energy supply as both of these will be the final determinants in convincing global manufacturers to relocate to UP.
There are observers within India who fret that it may already be too late and that China’s first mover advantage may have met the excess demand that existed, leaving nothing on the table for India to aim for. Raghuram Rajan, Governor of the Reserve Bank of India is one such believer: “The world as a whole is unlikely to be able to accommodate another export-led China,” he said in December 2014 in a speech warning against the imposition of more tariffs.
And this is where Akhilesh Yadav’s initiative of the Delhi-Mumbai Industrial Corridor (DMIC) is key. The DMIC has been described as India’s most ambitious infrastructure programme aimed at developing new industrial ‘smart’ cities and converging next generation technologies across infrastructure sectors. The idea is to expand India’s manufacturing and services base and develop DMIC as a global manufacturing and trading hub. The programme is geared towards providing a major impetus to planned urbanisation in India with manufacturing as the key driver.
In addition to the new industrial cities, the programme also calls for the development of infrastructure like power plants, assured water supply, high capacity transportation and logistics facilities. On a human scale it will also require development in soft infrastructure such as skills development programmes and education.
As a launch initiative, seven new industrial cities are being developed with the complete programme being conceptualised in partnership and collaboration with the Government of Japan. The overall vision of the programme is to create a strong economic base within a globally competitive environment and state-of-the-art infrastructure to activate local commerce, enhance foreign investments and achieve sustainable development.
From UP’s perspective, the Dadri-Noida-Ghaziabad Investment Region project looks at five selected projects including the Greater Noida railway station, a multi-modal logistics hub and an international airport at Greater Noida, another booming city of UP located on the outskirts of Delhi, the capital of India. The project is seen as offering good potential for flagship foreign investment in the region in which the existing industrial belt is strengthened and enhanced further. Boraki and Dadri will be the locations for projects including the railway station and logistics hub to help achieve further development and completion of Greater Noida.
In early January the Noida and Greater Noida Authorities chairman and CEO Rama Raman said the project, “Will not only generate thousand of jobs but also work as oxygen for the real estate sector of North India.” Under the project the Greater Noida Authority, on behalf of the UP Government, will enter into an agreement with the centre for developing infrastructure for first “early bird projects” in integrated industrial townships in the state along the DMIC. Both the DMIC trust and Greater Noida Authority are in talks to sign a joint venture to executing the project in UP.
Raman said, “Under the project early bird projects, there will be development of Boraki Railway Station as Passenger and Commercial Cargo Hub, Multi Modal Logistics Hub at Dadri, Power Project at Greater Noida, Mass Rapid Transit System (MRTS) between Dadri-Noida-Ghaziabad Investment Region and Delhi.”
Nirmal Singh, who is vice chairman of real estate firm Lotus Greens said, “One of the important projects undertaken by the Government of India which will benefit Uttar Pradesh and National Capital Region (NCR) at large is the Delhi Mumbai Industrial Corridor. This is India’s most ambitious infrastructure development project which aims at developing new-age cities we know as ‘SMART Cities’ and converging next generation technologies across infrastructure sectors thereby providing major thrust to planned urbanisation in India.”
Singh added, “The initial phase development of DMIC will create a huge impact on the already developed region of Delhi NCR including Noida and Greater Noida due to the construction of the nodal point of Dadri-Noida-Ghaziabad Investment Region.”
Another real estate firm that set to come on board with investment in the region is Orris Infrastructure. The company’s MD Amit Gupta believes the proposed DMIC “promises to open the floodgates of new investment opportunities and is expected to be that catalytic factor that promises to offer investors a gold mine once the project is over.”
Adding, “There is no denying this high-speed connectivity between Delhi and Mumbai offers immense opportunities for development of an industrial corridor along the alignment of the connecting infrastructure.”
Dedicated Freight Corridor Corporation of India
From a rail perspective, the Dedicated Freight Corridor Corporation of India is a special purpose vehicle set up under the administrative control of the Ministry of Railways to undertake planning and development, mobilisation of financial resources and construction and maintenance and operation of the dedicated freight corridors. This is crucial to the development of UP.
The plan to construct dedicated freight corridors across the country marks a shift in the modus operandi of Indian Railways (IR) that has in the past run mixed traffic across its network. Once completed, the dedicated freight corridors will enable Indian Railways to improve its customer orientation and meet the needs of the market more effectively. Creation of rail infrastructure on such a scale is also expected to drive the establishment of industrial corridors and logistics parks along its path, bringing music to the ears of the UP Government.
The Indian Railways’ linking of Delhi, Mumbai, Chennai and Howrah and its two diagonals, Delhi-Chennai and Mumbai-Howrah, have added up to a total route length of 10,122 km which now carries more than 55 per cent of revenue earning freight traffic of IR. The existing trunk routes of Howrah-Delhi on the Eastern Corridor and Mumbai-Delhi on the Western Corridor are highly saturated with line capacity utilisation varying between 115 to 150 per cent. The surging power needs for heavy coal movement; booming infrastructure construction and growth in the international trade are all core factors that have led to the conception of the dedicated freight corridors along the eastern and western routes.
The Eastern Dedicated Freight Corridor (EDFC), with a route length of 1,839 km, is being supported by the World Bank (WB). In December, the Government of India and the bank signed a $1.1 billion agreement towards the second loan for the EDFC project. The project itself consists of two distinct segments: an electrified double-track segment of 1,392 km between Dankuni in West Bengal and Khurja in Uttar Pradesh plus an electrified single-track segment of 447 km between Ludhiana – Khurja – Dadri in the state of Punjab and Uttar Pradesh.
According to the World Bank the Project will help increase the capacity of these freight-only lines by raising the axle-load limit from 22.9 to 25 tonnes and enable speeds of up to 100 km/hr. It will also help develop the institutional capacity of the DFCCIL to build and maintain the DFC infrastructure network.
The Eastern Corridor will traverse six states and is projected to cater to a number of traffic streams and sectors including transport of coal for the power plants in the northern region of UP, Delhi, Harayana, Punjab and parts of Rajasthan, finished steel, food grains, cement, fertilisers, and lime stone. The total traffic in the direction of Uttar Pradesh is projected to go up to 116m tonnes by 2021/22.
The net result of all this activity paints a picture of a state that is the middle of its biggest ever growth phase. Jobs, investment and prosperity of farmers, manufacturers, and the common person are forecast to receive the most significant benefits of this growth with a once in a lifetime chance to put Uttar Pradesh on the map as one of the most significant industrial powerhouses of the region.