DFC could be the key catalyst to provide trade competitiveness and improve supply chains. However, its development may stall if there is not enough support of enabling institutional, regulatory, legal and administrative framework, writes Rohit Chaturvedi.
Many driving forces are touted by a number of economists to create magic formula for developing regions as economic powerhouses. One force caught fancy is the impact of the clustering force. What is the clustering force? How does it impact the well being of any region? These are important questions. This article attempts to answer these questions and look at the proposed development of dedicated freight corridor (DFC) to assess if DFC could emerge as the key enabler to unleash cluster forces in India.
Power of the cluster
It may be observed that the cities and mega-regions, with all their problems, produce much higher output per unit area than sparsely populated areas. Critics may attribute this to sheer population density of the cities. However, on another look, output per person in the cities and mega-regions far exceed than that in less populated peers. The clustering forces in the cities and mega regions bring about the economic power through clustering of talent and manpower. The talent and manpower together create social organisations which are more productive and innovative.
In fact, social organisations benefit from economy-of-scale phenomenon both in terms of material infrastructure such as roads, water pipes, etc, and softer aspects such as rapid flow of knowledge. Researchers have observed a phenomenon called "Super-linear Scaling" when the cities grow. This in simple term says that growth in innovation and wealth per person increase in cities when population grows.
Examples are abound both in India and globally. Cities like Mumbai and Delhi grab maximum share of fruits of economic growth. Elsewhere, places like Silicon Valley have also thrived benefiting from specific kind of cluster phenomenon.
Does that mean powerful economic regions could be created? If yes, is there a proven recipe and what does it include? Building blocks of a successful cluster The discussion so far revolved around the benefits of a cluster. We will now try to understand the underlying factors in creating the clusters. It may be important to understand that various tangible and intangible aspects determine the success of any cluster but there are some necessary conditions (though not sufficient) which need to be met. These conditions include:
The list above is by no means exhaustive but only touches upon the most important factors determining the success of any cluster. One of the most important factors to develop successful clusters is good connectivity. A location with good connectivity gravitates people towards it. Many locations with excellent plan for industrial development have failed to take off owing to poor connectivity. Thus, importance of connectivity in enabling successful implementation of clusters cannot be over-emphasised. A case in point being Shenzhen in China which is one of the fastest growing cities in the world. Shenzhen is well connected with road, rail and airport network. Two arterial railways cutting across China meet at Shenzhen. The regions with well-established connectivity infrastructure tend to be more developed than less connected places.
DFC: cornerstone of developing clusters
DFC offers great opportunity to develop globally competitive industrial corridor in India with world class connectivity infrastructure running across the industrial regions of India.
The Indian Railways' (IR) quadrilateral linking the four metropolitan cities of Delhi, Mumbai, Chennai and Howrah, which is also known as the Golden Quadrilateral, along with its two diagonals (Delhi-Chennai and Mumbai-Howrah), spans a total route length of 10,122 km and hauls more than 55 per cent of freight traffic (revenue earning) of IR. The existing trunk routes of Howrah-Delhi on the Eastern Corridor and Mumbai-Delhi on the Western Corridor are highly congested with a line capacity utilisation varying from 115 per cent to 150 per cent. Given the extant conditions, the DFC was conceptualised with the following primary goals:
The DFC is being developed in two parts, ie, Eastern DFC (north to east connectivity) and Western DFC (north to west connectivity) and is expected to be operational by 2019.
DFC is likely to offer significant advantages in terms of substantially reduced transportation cost owing to higher capacity and quick turnarounds. The separation of passenger and freight traffic will also have positive impact on supply chains via enhanced responsiveness and less in-transit inventory. The development of DFC will result in improved efficiency and higher productivity.
The reduction of transit time due to increase in speed and modern operations will also positively impact agriculture and transport of perishable goods. Therefore, the development of DFC will not only help the manufacturing sector but also have salubrious impact on the agriculture sector.
Cluster development: industrial corridors
With the development of DFC, the opportunities for developing clusters are expected to open up. DFC is likely to remove one of the major obstacles, ie, efficient transport infrastructure coming in the way of competitiveness of Indian industries especially in manufacturing and agriculture sector.
One of the cluster-based approaches that can be pursued along with DFC is to develop industrial corridor along the DFC. Industrial corridors in India can emerge as engines of enhancing manufacturing prowess of the country. One such development is Delhi Mumbai Industrial Corridor (DMIC), which is seen as a key step in developing manufacturing regions. DMIC is being developed with the objective to expand India's manufacturing and services base and develop DMIC as a "Global Manufacturing and Trading Hub". The plan's goal is to increase urbanisation with manufacturing as key catalyst. The plan has a comprehensive approach to develop new cities and associated infrastructure. In the first phase seven new industrial cities are planned to be developed by 2019. DMIC is planned to be developed along the industrial North-West Corridor of India. It is aligned with the ambitious rail connectivity project DFC. DMIC is envisaged to be developed along the Western Corridor.
In a nutshell, DFC has already offered the way ahead by providing a key component to the development of industrial corridor thus enabling cluster forces. However, development of DFC might run into trouble with myriad issues. These issues, if remain unresolved, could put one of the high potential development plan to a grinding halt.
Issues in the development of DFC
DFC has faced delays due to the difficulties involved with land acquisition, eg, on the Eastern DFC due to the non-availability of land along the existing corridor particularly near important city centres and industrial townships. The land availability issues not only posed technical problems such as re-ordering of junction arrangements, but also may cause cost overruns and delays. Also non-availability of land near the rail network may undo advantages offered by good network by erecting last mile bottlenecks. Another significant problem affecting the DFC is caused by issues related to environmental clearance issues.
The lack of administrative clarity is another important issue that needs quick resolution. It is understood that ownership of DFCCIL has been a matter of debate between various stakeholders. From the success of Delhi Metro (DMRC) and NHAI, the lesson may be learnt to make DFCCIL as an independent institution with clear KRAs.
DFC could be key catalyst to provide trade competitiveness and improve supply chains. The DFC can spawn clusters which in turn can give a boost o productivity and efficiencies. However, development of Dedicated Freight Corridor may stall without the support of enabling institutional, regulatory, legal and administrative framework.
It is imperative to create an enabling environment and increased coordination between various stakeholders to give development of DFC a top priority. The focused approach to develop DFC will provide the strong foundation for developing industrial corridors to create competitive clusters across the country.