Japanese PM visit rescues $90 billion Delhi-Mumbai corridor

The much-hyped Delhi-Mumbai industrial corridor (DMIC) has got a fresh lease of life after Japanese Prime Minister Yukio Hatoyama’s delegation signed agreements to pump in $75 million into the project to start off planning and preparatory activities.

The Indian government has already promised an equivalent amount (Rs 330 crore) as its share of the $150 million project management fund.

The project, to be built on both sides of the upcoming Delhi-Mumbai dedicated rail (freight) corridor, envisages converting 24 such locations into hi-tech residential and industrial hubs.

According to the plan, the government-promoted DMIC Development Corporation would carry out all the planning and preparatory work, including securing all government clearances for each project. The projects would then be handed over to specially floated companies which would then carry out the project through a mix of public and private fund raising. The initial investment by the DMIC Development Corp in planning and getting approvals will be recovered at the time of selling the special purpose company and used for the next project.

Monday’s deal with the Japan Bank for International Cooperation enables DMIC Development Corp to set up the initial project management fund, which will be used to plan each project, get the approvals and hold the bidding process.

The total loan from JBIC will be disbursed over a period of around 3.5 years, during which the project development fund will assume the targeted size of $150 million.
India had initially wanted to start off with a $250 million fund on the ground that of the total $90 billion estimate, around $2.5-3 billion would have to be spent on planning and preparation.

Amitabh Kant, CEO of DMIC Development Corp, said planning work will start early next year and initial projects will be ready for divestment as early as six months from now.

“The full-scale development can happen only by 2017 when the dedicated freight corridor is ready, since the industries are dependent on it for raw materials and moving finished goods. But we don’t want to wait till then, so we have identified certain early bird projects which are not full-scale city projects, but more like smaller industrial complexes,” he said.

The full plan includes building from scratch a series of ‘eco friendly’ industrial cities along the corridor at a cost of Rs 3.6 lakh crore using both public and private resources. “The idea is not to repeat any of the mistakes we have made in putting up our cities. We will use the state of the art technology to create cities of the future. Every industrial unit, for example, will get just a single bill for their water, power and sanitation facilities,” Kant added.

Among the six initial sites identified for development are Dadri-Noida-Ghaziabad in UP, Manesar-Bawal in Haryana, Khushkhera-Bhiwadi-Neemrana in Rajasthan, Pitampura-Dhar-Mhow in Madhya Pradesh and Bharuch-Dahej in Gujarat.

Going by initial indications, the projects are likely to see huge participation from Japanese companies. For example, in the planned Neemrana III industrial unit, 19 major Japanese companies have committed to start manufacturing operations. These include Mitsubishi Chemicals, Daikin Air Conditioners and Nissin Brakes.

Recent years have seen investments from Japan, a country with ageing population and declining growth rate, to India increase, reaching almost the same level as the country’s investments into China in 2008. But then, Japanese investments into both China and India declined by about a third this year due to the effects of the economic slowdown.
The corridor project envisages a strategic alliance between Japanese companies and Singaporean developers to develop industrial infrastructure and bases in India.