• Strategies

Entrepreneur (E): What is the Delhi Mumbai Industrial Corridor (DMIC)?
Amitabh Kant (AK): India is building a dedicated freight corridor which will link up Delhi to Mumbai over a distance of 1,483 km. It is the first time in the country that a containerized train will come into existence by December 2016. This will enable goods produced in the northern parts of India to be put to the ports through double and triple stacking at high speeds. At present all goods produced in northern India either move through passenger trains or through the highways and the road network, which means they take about 11-12 days to reach ports. This also means the logistics costs in India are very high compared to other parts of the world.
A completely new route between Delhi and Mumbai has been identified and this opens up the possibility of creating manufacturing infrastructure on both sides of this dedicated freight corridor. It opens up the ability to plan, develop along international standards outstanding infrastructure and create new industrial cities on either side. When you create industrial cities you do not only look at manufacturing but also at workers, managers and the family setup. Much like Mumbai, Kolkata and other cities were created at one time; the need today is to create integrated cities which are great to live, work and play in. The DMIC is developing trunk infrastructure on either side of this train, which will be run by the dedicated freight corridor. In the first phase, we will develop seven new cities. The corridor passes through six states of India which account for 50 percent of India’s GDP and at least one city will come up in each of these states, with an additional city of Dighi Port in Maharashtra.
We have moved ahead in six of the cities that are to come up and the only state where we have not been able to make much progress is in UP. Spending Rs.50,000 crore, the government of India is now creating this new train.
E: What has the planning and implementing process been like so far?
AK: A year and a half back we took it to the stage of master planning for each city and took approval from state governments. We brought in global master planners since it involved concepts of a city with new technologies.
If India has to grow at 9-10 percent over a long period of time, then its manufacturing sector has to grow at about 15-16 percent and if manufacturing has to grow at 15-16 percent, one has to create jobs. A McKinsey study says 350 million people will get urbanized by 2030, 700 million people by 2050 and, so, if you do not create jobs, your existing cities will become slums. A huge amount of urbanization is likely to happen in India, so it is important to create jobs. Cities will account for nearly 70 percent of India’s GDP by 2030. We are developing seven nodes to develop cities. We have tried to benchmark it against the best new industrial cities across the world. The first city to come up will be Dholera, which will have a population of about two million with eight lakh people finding employment.

E: How will such a city be developed?
AK: When cities were developed across the U.S.A. and Europe, gas and power were cheaply available. This is not the case today, which means one needs to do a sustainable development around the transport axis. For Dholera, we are creating a transport axis which will connect from Ahmedabad and go up to Bhavnagar. Within the cities, there will be broad roads for cars, walking and cycling. The key here is that we have planned for both industrial and residential aspects of the city. The basic premise is also on reducing commuting time for workers and ensuring that they are close to working areas, looking to recycle things, energy sufficiency, smart city real time control and governance amongst others.
We are focusing now on creating trunk infrastructure like drainage, sewage, roads etc and getting private players to come in. We are doing six gas-based power projects, two solar projects, and several large multi-modal logistic hubs.
We are also doing several technological initiatives in these smart cities where digital technology helps you create a central command room to run power, water, safety and security.
We are working with several Japanese corporations like Hitachi, Mitsubishi and others to develop an IT-based city.

E: What about the financial aspect?
AK: After the master planning, we did the financial planning and it was clear that it was not possible to do everything on a public private partnership. We have decided to do the trunk infrastructure work using government resources which would be 30-40 percent of the work needed to build a city. These cities may take a long time to break even, as long as 15-16 years, but once they do, they will generate such resources that we can create many more cities with that money. That is what we intend to do. We have looked at the sources of funds and the spending of funds but the key is that if India was to create new cities and have instruments of debts for 12-13 years, it can create many new cities and then use the upside earnings.
The challenge here is to monetize land value and use urbanization as a business model. This is what DMICDC (Delhi Mumbai Industrial Corridor Development Corporation) is planning to do across cities. The governments of India and Japan have, for this purpose, created a revolving fund worth approximately Rs.40,000 crore where the Indian government is expected to contribute Rs.17,500 crore and the Japanese side is expected to contribute about Rs.20,250 crore. This fund has been given the option to raise more money through capital grants, bilateral resources, infrastructure bonds and multilateral sources. DMICDC will develop and do projects across functions like power, water etc and at the city level, states will bring in the land. Getting land is a state function.
The trunk infrastructure money will not come as grant but either as debt or equity. The main aim is to break even in around 15-16 years and then ensure the proceeds come into this revolving fund.

E: What are the opportunities for the private sector while the project is being implemented? What happens after the city is created?
AK: Nothing in this project is being done through the government. Government funding is being used only to structure the project and bid out projects. Some projects will be EPC which the private sector will do. There is opportunity for financing companies, opportunities tech companies, opportunities for PPP projects and for program monitor.
This project will enable you to bring in large and smaller players to contribute. Cities get made over 30-40 years in different phases but initially an industrial city will have to be managed through an SPV between central and state governments. Therefore, both the state and central government will have to manage it effectively.
I see many aspects like municipal services being outsourced.

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Amitabh Kant, Delhi Mumbai Industrial Corridor, Incredible India, tourism ministry