L&T, Sojitz set to win Rs.6,700 crore rail contract

New Delhi: A consortium of Larsen and Toubro Ltd ( L&T ) and Sojitz Corp. of Japan is set to be awarded a Rs. 6,700 crore railway contract, one of the country’s biggest, according to two Dedicated Freight Corridor Corp. of India Ltd (DFCCIL) executives who didn’t want to be named.

The firms will design and construct a 640km twin-track line that will form part of the western dedicated freight corridor (DFC), according to one of the officials. Also in the race were a consortium of Mitsui and Co. Ltd, Ircon International Ltd and Leighton Contractors Pty Ltd.
“The consortium between L&T and Sojitz placed the lowest bid and won both the financial and technical contracts,” said the official cited above.

The stretch will connect Rewari in Haryana and Palanpur in Gujarat and is part of the 1,483km western corridor proposed between Dadri (near Delhi) and Jawaharlal Nehru Port (near Mumbai).

“It is an excellent development for L&T as the contract is close to 10% of its existing order book size,” said Sudip Bandyopadhyay, managing director and chief executive, Destimoney Securities Pvt. Ltd. “Also, of late L&T had been moving a lot of its business abroad as infrastructure had slowed down domestically. After a long period L&T has won a government funded contract and that boosts confidence in the Indian market and in the India infrastructure story.”

An L&T spokesperson said, “We do not comment on market speculation”, in response to an email query.
The official announcement will be made after the Japan International Cooperation Agency (JICA), the funding agency, gives its approval, said the second DFCCIL official. JICA’s approval is expected before the end of this month, this person said.

“The concessionaires will be able to begin work soon after JICA’s approval. We have acquired all the land required for this stretch and already have all other clearances like environment, forest etc. in place,” said the first official.

India is building freight corridors to improve efficiency in moving goods across the country and help businesses expand their markets by creating better infrastructure.

The contract will be the second big one awarded by DFCCIL. In January, it picked a joint venture of Tata Projects Ltd (TPL) and Aldesa Construcciones SA of Spain to construct the Rs.3,300 crore, 343km double-track line between Khurja and Kanpur that forms part of the eastern freight corridor. The joint venture started work on the stretch in March.

DFCCIL is a special purpose vehicle of the Indian Railways mandated to build dedicated freight corridors. The eastern and western corridors are the two it’s engaged in setting up currently. The 1,839km eastern corridor connects Ludhiana in Punjab and Dankuni in West Bengal. The two corridors are estimated to need an investment of about Rs.1 trillion. The eastern corridor is being funded by World Bank loans worth $2.72 billion, while the western one is being built with 677 billion yen in loans from JICA.

DFCCIL wants to complete both the corridors by 2017-18.

“The award has been given at a competitive rate,” said R. Sivadasan, former financial commissioner, ministry of railways. “It is comparable to the rates at which the railways, had it undertaken the construction itself, would have built the stretch. The route between Haryana and Gujrat is not complicated, so I think that project can be easily completed on time.”