The World Bank Eastern Dedicated Freight Corridor - I (P114338) REPORT NO.: RES35651 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF EASTERN DEDICATED FREIGHT CORRIDOR - I APPROVED ON MAY 31, 2011 TO DEPARTMENT OF ECONOMIC AFFAIRS, GOVERNMENT OF INDIA TRANSPORT SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Senior Global Practice Director: Guangzhe Chen Practice Manager/Manager: Shomik Raj Mehndiratta Task Team Leader: Martha B. Lawrence, Atul Agarwal, Sanjeev Deorao Moholkar The World Bank Eastern Dedicated Freight Corridor - I (P114338) ABBREVIATIONS AND ACRONYMS Abbreviation Description APL Adjustable Programmatic Loan DFCCIL Dedicated Freight Corridor Corporation of India, Ltd. EDFC Eastern Dedicated Freight Corridor IR Indian Railways MOR Ministry of Railways PDO Project Development Objective PMC Project Management Consultant The World Bank Eastern Dedicated Freight Corridor - I (P114338) BASIC DATA Product Information Project ID Financing Instrument P114338 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 31-May-2011 31-Dec-2018 Organizations Borrower Responsible Agency Department of Economic Affairs, Government of India Dedicated Freight Corridor Corporation of India Ltd. Project Development Objective (PDO) Original PDO The development objectives of the project are to: (a) provide additional rail transport capacity, improved service quality and higher freight throughput on the 343 km Khurja and Kanpur section of the Eastern rail corridor; and (b) develop the institutional capacity of the Dedicated Freight Corridor Corporation of India Limited to build and maintain the dedicated freight corridor infrastructure network. Current PDO The Development Objectives of the Project are to: (a) provide additional rail transport capacity, improved service quality and higher freight throughput on the Khurja - Kanpur section and the Khurja – Dadri section of the Eastern rail corridor; and (b) develop the institutional capacity of DFCCIL to build and maintain the DFC infrastructure network. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-80660 31-May-2011 27-Oct-2011 30-Dec-2011 31-Dec-2018 555.00 413.88 141.12 The World Bank Eastern Dedicated Freight Corridor - I (P114338) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Background 1. The Indian Ministry of Railways (MoR) oversees the Indian railway sector, exercises all central government policy powers in the rail sector and administers, supervises and directs most of the entities that provide rail service in India. Indian Railways (IR) comprises the 16 geographically-based Zonal Railway entities that manage the railway network and provide train services. They belong to the Government of India through the Ministry of Railways and are units of government, without corporate legal status. 2. Indian Railways (IR) has been seeing its freight traffic growth stymied on the “Golden Quadrilateral” (lines linking Mumbai, Delhi, Kolkata, Chennai), by a shortage of infrastructure capacity and by the prioritization of passenger train over freight trains. To provide additional capacity, specifically designed for freight, Ministry of Railways (MOR) has approved the construction of dedicated freight lines. These are being built and will be operated by the Dedicated Freight Corridor Corporation of India, Ltd, which is a corporation under MOR. It is currently constructing two corridors. The Eastern Dedicated Freight Corridor (EDFC), which is financed by the World Bank, reaches from Ludhiana through Delhi toward Kolkata. The Western Dedicated Freight Corridor, financed by JICA, will link Mumbai and Delhi. 3. The Eastern Dedicated Freight Corridor is being finance through an Adjustable Programmatic Loan (APL) program. The overall Program Development Objective is: Meet the growing freight and passenger demand on the eastern corridor (Ludhiana-Delhi-Kolkata) with an improved level of service; and develop institutional capacities of DFCCIL and IR to build and operate the DFC network. Each project in the APL covers a different section of the line (see map on following page): (i) APL-1 (approved in 2011) finances the Khurja – Kanpur section (390 km). (ii) APL-2 (approved in 2014) finances the Kanpur – Mughal Sarai section (402 km). (iii) APL-3 (approved in 2016) finances the Khurja – Ludhiana section (401 km). The World Bank Eastern Dedicated Freight Corridor - I (P114338) The World Bank Eastern Dedicated Freight Corridor - I (P114338) 4. Each APL project shares the Program Objective and has a Project Development Objective (PDO) that is specific to the line section financed by the project. The original PDO for APL-1 was to “(a) provide additional rail transport capacity, improved service quality and higher freight throughput on the 343 km Khurja and Kanpur section of the Eastern rail corridor; and (b) develop the institutional capacity of the Dedicated Freight Corridor Corporation of India Limited to build and maintain the dedicated freight corridor infrastructure network.” 5. In 2015, APL-1 was restructured to use project savings to add the line section Khurja – Dadri (49 km), which will link the Eastern Corridor to the Western Corridor. The PDO was revised to include this section: “a) provide additional rail transport capacity, improved service quality and higher freight throughput on the Khurja - Kanpur section and the Khurja – Dadri section of the Eastern rail corridor; and (b) develop the institutional capacity of DFCCIL to build and maintain the DFC infrastructure network.” B. Project Status 6. Currently, construction work on the original Khurja – Kanpur section is advanced, with testing and commissioning expected to start in May 2019. Civil works construction is underway in the Khurja – Dadri section, and about half of the track is expected to be completed by May 2019. Systems for the Khurja – Dadri section will take substantially more time to complete. 7. Institutional capacity of DFCCIL and IR has been developed through: (i) Implementation of a concession agreement and an access agreement between MOR and DFCCIL, that sets the stage from implementing private freight access on DFCCIL; (ii) Substantial technical assistance to DFCCIL to prepare it for operations, including support to prepare a commercial strategy, operational manual, study on establishing a Heavy Haul Institute and access pricing methodology. (iii) Support to DFCCIL to design a Heavy Haul Institute to develop and transfer best practice on operation of a heavy haul freight railway. 8. The project PDO rating is moderately unsatisfactory. Following the restructuring, the project will be eligible to be upgraded and the restructuring changes will make adequate provision for the project to be completed successfully. The implementation progress rating is moderately unsatisfactory because of two social safeguards issues that arose during the October 2018 mission and the lack of Team Leaders for the two PMCs. One of the social safeguards issues has been resolved by updating the Resettlement Framework and DFCCIL has agreed a resolution to the other (in writing received December 21, 2018) to be carried out in the coming months. DFCCIL is in process of replacing PMC team leaders, with suitable candidates proposed by PMC consultants. II. DESCRIPTION OF PROPOSED CHANGES 9. The Ministry of Finance, Department of Economic Affairs has sent a letter dated December 4, 2018, requesting the following restructuring of the APL program: (i) Extension of the project closing date for APL-1 from December 31, 2018 to May 31, 2019. (ii) Transfer of pending activities worth an estimated $145 million to APL-2 or APL-3. (iii) Cancellation of savings of $245 million out of $800 million. 10. The cancellation of loan savings was accomplished through the prior restructuring and communicated in a letter dated December 18, 2018. This restructuring is to process the extension of the project closing date to May 31, 2019. It was The World Bank Eastern Dedicated Freight Corridor - I (P114338) separated from the cancellation to ensure that adequate progress had been made on the implementation issues discussed in paragraph 8. The restructuring to transfer pending activities will be processed in May 2019. 11. Extension of the project closing date until May 31, 2019 will allow construction of the Khurja – Kanpur section of the line to be substantially completed, bringing this portion of the APL to a logical conclusion. Only finishing works and testing and commissioning will be transferred. It will also allow the technical assistance for commercial strategy, operations manual, access pricing and design of a Heavy Haul Institute to be finished. 12. Construction of the Khurja – Dadri section will be transferred. This will include about half of the track works and most of the systems works for that section. Establishment of the Heavy Haul Institute, based on the completed study, will be also transferred. 13. These pending activities will be transferred to APL-2, which has substantial loan savings arising from the Rupee’s depreciation against the US$. If APL-2 funds are not sufficient, and savings arise in APL-3, any activities that cannot be funded from APL-2 may later be transferred to APL-3. 14. Results indicators for Khurja – Kanpur section will not be changed, but the dates by which targets should be achieved will be extended to reflect the extended project closing date. Targets for Khurja – Dadri section will be shifted to APL-2. 15. The extension of the closing date would have a minor negative effect on the economic and financial rates of return on the project because the timing of expected project benefits will occur five months later. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Implementation Schedule ✔ Economic and Financial Analysis ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ The World Bank Eastern Dedicated Freight Corridor - I (P114338) EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-80660 Effective 30-Jun-2017 31-Dec-2018 31-May-2019 30-Sep-2019 . The World Bank Eastern Dedicated Freight Corridor - I (P114338) . Results framework COUNTRY: India Eastern Dedicated Freight Corridor - I Project Development Objectives(s) The Development Objectives of the Project are to: (a) provide additional rail transport capacity, improved service quality and higher freight throughput on the Khurja - Kanpur section and the Khurja – Dadri section of the Eastern rail corridor; and (b) develop the institutional capacity of DFCCIL to build and maintain the DFC infrastructure network. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Provide additional rail transport capacity, improved service quality and higher freight throughput Additional freight train paths on DFC (pairs/day) (Text) 0.00 100.00 Average Speed of freight train (Kmph) (Kilometers) 25.00 60.00 Increased number of express passenger train on section (Text) 69.00 Not available DFC Freight Traffic (GTKM bn ton) (Text) NA 50.10 DFC Freight Traffic (NTKM bn ton-km) (Text) 18.00 32.50 PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Design, Construction and Commissioning of the Khurja - Kanpur and Khurja - Dadri Sections CWT and Systems Contracts Awarded (Yes/No) No Yes The World Bank Eastern Dedicated Freight Corridor - I (P114338) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Institutional Development to assist DFCCIL and MOR to develop their capabilities best utilize heavy haul freight systems. Development of Heavy Haul Systems (Text) No heavy haul systems in place. System in place. MoR and DFCCIL sign Concession Agreement (Text) Not signed Signed DFCCIl Staff Strength (Number) 380.00 9,800.00 Specifications and requirements for year 2013 finalized and Locomotive and Wagon Program (Text) No plan procurement strategy in place. DFCCIL staff in officer cadre (Text) 200.00 497.00 IO Table SPACE The World Bank Eastern Dedicated Freight Corridor - I (P114338)