Railways secure $245m loan from World Bank to cut emissions from logistics project

The World Bank on Thursday approved a $245 million loan for the Rail Logistics Project to help reduce India’s high carbon emissions and low freight modal share in the railways.

“The project will help India shift more traffic from road to rail, making transport – both freight and passenger – more efficient, and reduce millions of tonnes of greenhouse gas emissions. (GES) every year. The project will also incentivize more private sector investment in the sector,” the multilateral financial institution said.

The loan, financed by the International Bank for Reconstruction and Development, has a maturity of 22 years, including a grace period of seven years.

The loan will see payment to the Dedicated Freight Corridor Corporation of India (DFCCI). “The amount is the fourth and final installment of payment for the Eastern Dedicated Freight Corridor (EDFC), which is partly funded by the World Bank,” said Amitabh Sharma, executive director at the Ministry of Railways. The corridor is partially operational and is expected to be completed by June 2023.

“The project will also support the institutional capacity building of DFCCI as a business organization and equip it to provide multimodal logistics services,” the World Bank statement said.

Road freight is the largest contributor to GHG emissions, accounting for about 95% of freight sector emissions, the World Bank said. It revealed that trucks also accounted for 12.3% of road accidents and 15.8% of total transport-related fatalities in 2018.

With rail carbon emissions accounting for one-fifth of road transport, achieving net zero carbon emissions by the national carrier can eliminate 7.5 million tonnes (mt) of GHG carbon dioxide each year.

India has pushed aggressively for a modal shift in logistics, aiming to revive the once-preferred freight carrier. In addition to environmental concerns related to carbon emissions via road transport, the overreliance on road transport leads to congestion of road networks, leading to delays and additional logistics costs. While railways are 45% cheaper, they are not preferred by manufacturers or distributors due to unfavorable reservation policies and lack of intermodal connectivity, a government report has observed.

The rail logistics project is expected to link several infrastructure projects in the country for seamless intermodal connectivity, increase rail capacity and increase private sector efficiency.

The railways have already started their foray into public-private participation in the EDFC, with a section between Sonnagar in Bihar and Dankuni in West Bengal being developed through the mode. Business Standard previously reported that the national carrier was also looking to involve the private sector more through infrastructure investment trusts (InvIT).

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