DMIC Summit – Developing Hub for Investors

DMIC Summit – Developing Hub for
Investors
Analysis and Report by Resurgent India

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Report Contents
Message from the desk of Sh JP Gadia
Section 1 : Overview and Approach
Section 2 : Implementation Framework
Section 3 : Phased Implementation -- Phase 1 Overview
Section 4 : Financing
Section 5 : Key Issues
Section 5 : Conclusion
About ASSOCHAM
About RESURGENT INDIA

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Message from the desk of
Sh. JP Gadia
DMIC is India’s biggest infrastructure investment and the largest infrastructure
project ever undertaken. At a cost of $100 billion and covering the states of Uttar
Pradesh, Haryana, Rajasthan, Madhya Pradesh, Gujarat, and Maharashtra, the
project aims to create top-notch infrastructure and establish 24 smart cities with
cutting-edge technology, connectivity across rail, road, port and air, and
uninterrupted power. DMIC also proposes to create a dedicated freight corridor
(DFC) in railways that will cover nearly 1,500 km will support high-speed train
connectivity and will run almost parallel to the Delhi–Mumbai Golden Quadrilateral
National Highway. Specifically, the project aims to triple industrial output in 9 years
and Quadruple exports from the region in 8-9 years. DMIC model has been drawn on
the lines of Tokyo-Osaka Industrial Corridor. Till date, the project has managed to
receive a significant amount of investment from Japan apart from the public-private
partnerships and the Government.
Since inception, the project progress has been plagued by several issues like land
acquisitions, delay in GST roll-out, operational and social and environment issues. It
is thus high time to effectively address these issues and work towards successful
implementation. As India is already on its way to implementing ‘Make in India’
campaign, this will only add to the entire process and make India one of the largest
economies of the world by 2025.
We are hopeful that this report will be helpful in diagnosing the right pushes and
allowing the industry to move forward with the continued positive momentum.

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DMIC Overview
Delhi-Mumbai Industrial Corridor, from here on referred to as DMIC, is a multi-modal
High Axle Load dedicated freight corridor connecting Delhi and Mumbai. It is a mega
infrastructure project at USD 100 billion with technical and financial aid built in from
Japan. The project is a flagship programme of Government of India with the aim of
creating futuristic Industrial Cities by leveraging the "High Speed - High Capacity"
connectivity backbone provided by Western Dedicated Freight Corridor (DFC). The
government has proposed to promote DMIC along the alignment of DFC between
Delhi and Mumbai. The envisaged alignment of freight corridor passes through
multiples states including Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh,
Gujarat and Maharashtra and is mostly aligned parallel to the existing railway tracks.
1504kms, of freight corridor will be covered to create industrial hub, with end
terminals at Tughlakabad and Dadri on one end and Jawaharlal Nehru Port at
Mumbai on the other.
Genesis
Vision & Objectives
The vision for DMIC is to develop it as a “global manufacturing and trading hub”. It
looks at creating a strong economic base with globally competitive environment and
infrastructure. It is to be conceived as a Model Industrial Corridor of international
standards with emphasis on expanding the manufacturing and services base.
In addition to new Industrial Cities, the programme envisages development of
infrastructure linkages like power plants, assured water supply, high capacity
transportation and logistics facilities as well as softer interventions like skill
development programme for employment of the local populace. This will drive
commerce, enhance foreign investments and attain sustainable development. Stable
regulations, well-developed communications, efficient transportation systems and the
pro-business environment are some of the essential requirements to be fulfilled to
accomplish the huge potential for growth and development. At a very basic level, to

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point towards the impact this project is capable of having, consider the time taken to
transport goods from North India to Western Coast. Currently goods produced in the
northern part of India take about 14 days to reach the ports on the western coast of
India. Post the corridor, the movement will take between only about 13 and 14 hours.
This will have impact across the supply chain for any product or industry.
Specifically, the project aims to deliver definite end results ensuring realization of
envisaged vision for the project. Accordingly the project goals for DMIC are:
 Triple industrial output in 9 years
 Quadruple exports from the region in 8-9 years
Characteristics
The project acknowledges and provides for effective integration between industry
and infrastructure leading to overall economic and social development. The corridors
constitute world class infrastructure such as high-speed transportation (rail, road)
network, ports with state-of- the-art cargo handling equipment, modern airports,
special economic regions/ industrial areas, logistic parks/trans-shipment hubs,
knowledge parks etc. along with enabling policy framework. Corridor approach for
industrial development primarily takes advantage of the existence of proven, inherent
and underutilized economic development potential within the influence region.
This also has long term advantages with respect to smoother backward and forward
access, decreased freight and communication costs, improved delivery time and
inventory handling. In all, aiming to develop new industrial cities as "Smart Cities"
and converging next generation technologies across infrastructure sectors.
Given the above context, the delivery can be seen under two broad heads of a.
Quality industrial investments and world class infrastructure facilities
a. Industrial Infrastructure : This entails providing for:
a. Up gradation of existing industrial clusters/ estates;
b. Developing new industrial clusters or townships and export oriented
manufacturing zones;
c. Development of ‘Skill Development Centers (or) Knowledge Hubs’
d. Developing agro-processing hubs with cold storage, packaging and
distribution and other allied infrastructure;
e. Developing IT/ ITES Hubs/ other service oriented facilities.
b. Physical and Social Infrastructure
a. Efficient logistics chain with multi-modal trans-shipment zones and
logistic hubs;
b. Provision of Feeder Road and Rail connectivity to ports, hinterlands
and markets;
c. Augmentation of existing port infrastructure and developing Greenfield
ports;
d. Up gradation/ Modernization of Airports;
e. Captive Power Generation Plants with power transmission facilities;
f. Environment and Human Sustainability

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g. Dovetailed social infrastructure to ensure attractive investment climate.
Coverage
A band of 150 km to 200 km has been chosen on both
the sides of the Freight corridor to be developed as the
Delhi-Mumbai Industrial Corridor.
In addition to the influence region, DMIC would also
include development of requisite feeder rail/road
connectivity to hinterland/markets and select ports along
the western coast.
Integrated Development Approach – Concept of Nodes
The corridor passes through multiple states and cities, each at a different level of
industrial development, natural endowment, human talent etc. The project
acknowledges and proposes to address this bottleneck through a holistic approach
while benefiting from the inherent strengths and competitiveness of each of the
DMIC states.
Given the above, high impact/ market
driven nodes identified across the corridor
under which integrated Investment Region
(IRs) and Industrial Areas (IAs) would be
set up. These regions are proposed to be
self-sustained industrial townships with
world-class infrastructure and connectivity,
reliable power and other quality social
infrastructure, and provide a globally
competitive environment conducive for
setting up businesses.
An Investment Region (IR) would be a
specifically delineated industrial region with
a minimum area of over 200 square
kilometers (20,000 hectares), while an
Industrial Area (IA) would be developed
with a minimum area of over 100 square
kilometers (10,000 hectares).
24 such special investment nodes - 11 IRs and 13 IAs spanning across six states
have been identified, based on pre-specified criteria.

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Investment Regions:
 Ahmedabad – Dholera Special Investment Region, Gujarat (903 sq. kms.)
 Dadri-Noida-Ghaziabad Investment Region,Uttar Pradesh, (218 sq. kms.).
 Manesar-Bawal Investment Region,Haryana (402 sq. kms.);
 Khushkhera-Bhiwadi-Neemrana Investment Region,Rajasthan (160 sq. kms.);
 Pitampur-Dhar-Mhow Investment Region,Madhya Pradesh (372 sq. kms.)
Industrial Areas:
 Shendra-Bidkin Industrial Area, Maharashtra (84 sq. kms.)
 DighiPort Industrial Area, Maharashtra (253 sq. kms.)
 Jodhpur-Pali-Marwar Industrial Area, Rajasthan (155 sq. kms.)

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Implementation and Institutional Framework
The effective implementation of such large and complex project, involving multiple
states and agencies calls for immaculate planning and a robust administrative
structure. In order to ensure that the traditional pitfalls of project implementation are
overcome, it is proposed that a Project Development approach be adopted, wherein
each facet of the project is rigorously developed from an engineering, financial,
contractual, environmental and social perspective, along with interlinkages, on
prioritization and selective basis and prior to commencement of implementation
The project will include number of sub-projects, some of which will be amenable for
PPP and others will have to be implemented departmentally by the government.
Accordingly, a four tier institutional structure has been put in place, to enable an
effective framework development:
a. An Apex Authority: Government of India constituted Apex Authority in
August, 2007 with Union Finance Minister as Chairman, other Cabinet
Ministers and Six Chief Ministers of DMIC States as Members. This is meant
to oversee the entire program and to ensure that the necessary policy and
administrative issues are tackled appropriately within the defined framework.
b. Dedicated Corporate Entity: Delhi Mumbai Industrial Corridor Development
Corporation Ltd. (DMICDC), a special purpose company, works as a servicing
agency for the Apex body. It undertakes project development services for
investment regions / industrial areas / economic regions / industrial nodes and
townships, for various central government agencies and also assists state
governments.
c. State Level Nodal Agencies : An existing institution was nominated by state
govt. for coordination between DMICDC, various State Govt. Entities;
d. Special Purpose Vehicles: Established for individual projects like, airport,
port, industrial area, road, power etc, to mobilize financial resources through
appropriate consortia and undertake actual implementation, operation and
maintenance.

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A brief purview of roles and responsibilities flowing from the implementation structure
has been presented below, with specific and detailed focus on DMICDC and Role of
State:
a. DMIC Steering Authority : The key functions of the authority will be
a. Project Approval
b. Financing Pattern Approval
c. Setting up timelines for implementation and monitoring
b. DMICDC : The corporate entity was formed with a view of providing :
a. A dedicated corporate entity, that has..
b. Support of government, but can work..
c. With the flexibility of a corporate environment, and is
d. Authorized to channelize funds from various sources to intended output
areas

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Delhi Mumbai Industrial Corridor Development Corporation Limited (DMICDC)
was incorporated on January 07, 2008 on a Public-Private Partnership model
with stakeholders from the private sector (Banks, FIIs), PSUs as well as from
the Central and State Governments concerned. The percentage shareholding
pattern is as below:
Source: DMICDC Website
The key functions of the entity are :
a. Detailed project preparation and obtaining various clearances
b. Evolving financing patterns for different components including
arranging finances, where required, on the basis of a sovereign
guarantee;
c. Co-ordination with various Union Ministries and State Governments,
Financial Institutions, and Infrastructure development agencies;
d. Monitoring the implementation of various components &
subcomponents and facilitating in their execution;
e. Introducing ‘state-of-the-art’ implementation methodologies and
know-how for quicker implementation of infrastructure projects;
f. Undertake project development services for various central
government projects and also help in assisting state governments
(where desired);
g. Secretariat of the Steering Authority
c. Special Purpose Vehicle: It is envisaged most of the projects in DMIC region
would be implemented through Public Private Partnership. Special Purpose
Companies are thus to be established for project implementation, operation,
maintenance and management of such facilities. The financial structure of
SPVs will include:
a. Own equity specific to each project,
b. Initial small equities could be of DMICDC, which would then be sold
to operators selected for implementation.

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c. Debts raised domestically and externally. Debts could also be
raised by DMICDC and passed on to SPVs.
The key functions here include: a. Implementation of specific components , b.
Projects to be awarded, preferably with all relevant clearances and bidding
process and c. Project operators to raise finances, implement and operate the
project
d. State level Nodal Agencies: State governments have the lead role in setting
up of various Investment regions and industrial areas in the DMIC. As part of
this, each state is meant to notify a nodal agency that will coordinate with
DMICDC in implementation of investment regions / industrial areas. The
agencies as notified, have been mentioned below:
Source: DMICDC Website

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Role of States
The role of state governments start from the point of notifying a nodal agency to
coordinate with DMICDC, State level agencies and SPVs. The agencies in turn, in
close coordination with the multiple agencies, and with the support of the state
governments work towards:
a. Facilitating all clearances required from the State Government
b. Acquiring/ assisting in acquiring the land necessary for setting up of the
infrastructure, processing and non-processing areas. The acquisition of land if
any must be in accordance with law and must provide for rehabilitation as per
the laid down norms. As far as possible acquisition of agricultural land may be
avoided.
c. Ensuring the availability of world-class physical and social infrastructure,
utilities and linkages under its jurisdiction within a stipulated time frame. It
includes: a. Power connectivity and availability of reliable and good quality
power. The units may also seek open access as per the regulations of the
State Electricity Regulatory Commission; b. Provision of bulk requirements of
water; c. o Road connectivity (State roads); d. Sewerage and effluent
treatment linkages; e. Appropriate infrastructure to address the health, safety
and environmental concerns.
d. Arrange requisite funding for development of infrastructure, through budgetary
resources, by availing existing schemes of Government of India as VGF and
IIFCL etc. or through loans from multilateral agencies

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Phased Implementation – Phase 1
Overview

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Phased Implementation and Current Status
Given the scale and complexity of the project, the implementation has been planned
in three phases. Government of India has accorded in-principle approval to the
project outline in August, 2007 and identified nodes for Phase-1 implementation: A
total of 8 manufacturing cities (in a mix of Industrial region and Industrial area) will be
developed in Phase 1. In terms of a dashboard, this means covering 8 investment
regions, 12 early bird projects, 2 MRTS projects, 1 Solar Plant and 2 Airports.
A brief Description, Coverage and Status of each of the above mentioned phase 1
sub-projects have been provided below. The key source of information for the
current status is the DMICDC website.
a. Manesar- Bawal Industrial Region
The designed site covers an area of about 402sq kms. This includes existing
Bawal Industrial Town and borders Rajasthan. The MBIR is the first
investment region to be designated under the proposed Delhi – Mumbai
Industrial Corridor project (DMIC). It is envisaged that the MBIR would
become a major industrial centre, having direct connectivity with DFC and
major National & State Highways. As part of the initial development following
three projects are likely to be taken forward immediately:

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a. Global City Project in Gurgaon
b. Integrated Multimodel Logistics Hub (MLH) Project
c. Mass Rapid Transit System
b. Dholera, Special Investment Region
DSIR has been planned over land measuring approximately 920 sq. km. It is
strategically located near the industrial cities of Vadodara, Ahmedabad,
Rajkot, Surat and Bhavnagar urban agglomerations. Being a large
developable area, the project is divided into six (6) Town Planning Schemes.
Town Planning Schemes 1 and 2 cover the development in Phase-I. Town
Planning Scheme 1 covers an area of approximately 51 sq km and Town
Planning Scheme 2 covers an area of approximately 102 sq km. To simplify
the execution further, an Activation Area of 22.5 sq. Km has been identified
which would act as catalyst for further investments and will provide a base for
taking up development of further phases. It will cover:
a. Roads and Services
b. Water Treatment Plant
c. Sewage Treatment Plant
d. Common Effluent Treatment Plant
e. Admin cum Business centre
f. MRTS/ RRTS
g. International Airport
c. Pithampur – Dhar –Mhow Region
The proposed infrastructure improvements will create a vibrant regional
economic center in an underutilized area planned for industrial and
commercial development. This will support job creation, preserve the
surroundings environmental and enhance the regional economy through:
a. Integrated Industrial Township ‘Vikram Udyogpuri’ Project in Ujjain

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b. Improvement of Water Supply System for Pithampur Industrial Area &
Phase- I.
d. Dadri Noida Ghaziabad IR
The Proposed Investment Region at Dadri-Noida-Ghaziabad would be located
within 50 km of the RewariDadri alignment of Dedicated Freight Corridor.
Other sub-projects include:
a. Integrated Industrial Township Project in Greater Noida
b. Multi Modal Logistics Hub, Noida
c. Multi Modal Transport Hub, Boraki
d. MRTS between DNGIR and IGI Airport, Delhi
e. Jodhpur Pali Marwar Industrial Area
The state government in addition to the first chosen node of Neemrana, has
identified Jodhpur Pali Marwar Industrial Area as the second node for
development under DMIC Project. It is intended to improve overall
connectivity of the region on the back of Marwar Junction.
f. Khushkhera Bhiwadi Neemrana Investment Region
The Khushkhera- Bhiwadi- Neemrana Investment Region is to be developed
in an identified area of around 165.6 square kilometres. The objective is to
create a world-class city—in this area, with industry as the main driver of
economic development and employment with non-industrial/non-processing
uses. Under Aerotropolis Project, an airport development plan for this

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Greenfield Airport has been prepared to determine the requirements for the
airport at the opening day and subsequent phases.
g. Shendra Bidkin Industrial Area (SBIA), Maharashtra
SBIA is located at a distance of approximately 15 km from downtown
Aurangabad and is 8 km east of the Aurangabad Airport. It is planned as a
new industrial corridor extending from the existing Maharashtra Industrial
Development Corporation’s (MIDC) Shendra Industrial Park to the town of
Bidkin.
The total area of SBIA admeasuring 84.17 sq kms has been divided into two
parts viz. Part-I and Part-II. The Part-I consisting of area of 41.42 sq km,
which is further divided into two parts, viz. Phase-I and Phase-II. The Phase-I
covers an area of 8.39 sq km located north of Jalna Road adjoining existing
MIDC Shendra Industrial Park. Phase-II includes the remaining area of 32.03
sq km located near Bidkin. This covers:
a. Roads and Utilities
b. Roads over bridges
c. STP/CETP/ WTP
d. District Administrative Building
e. Landscaping
h. Dighi Port Industrial Area
The total land available for development in the DPIA is around 253 square
kilometers (after excluding forest and undulating terrain). It is meant to be a
port, trade and industrial hub that will augment the existing port ad global hub.

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DMIC Financing
DMIC will be an essential component of India’s future economic development.
Implementation of DMIC Project requires huge investment for building up of
infrastructure. It is envisaged that there will be primarily two categories of projects
under the purview of state and central government agencies as:
 Category-1: Projects that can be implemented through Public Private
Partnership (PPP Viable Projects) viz. Logistics Infrastructure, Power Plants,
Ports and Airports, Special Economic Zones, industrial Parks,
IT/ITES/Biotech, Hubs and Agro-Processing Hubs, Knowledge Cities,
Integrated Townships; and Augmentation of selected National and State
Highways.
 Category-2: Other Projects (Non- PPP Projects) viz. Augmentation of rail
linkages and development of connectivity to the identified investment regions/
industrial areas, Provision of requisite urban infrastructure, Augmentation of
industrial areas, Provision of missing links and augmentation of state
highways.
DMICDC is the overall in charge for development and execution of the project. The
government of India owns 49% stake in the DMICDC, the Japan Bank for
International Co-operation owns 26% and other government-owned financial
institutions share the remaining 25% equity.
The whole project spread over two phases is estimated to cost USD 100 Bn. Of this,
USD 2-2.5 Bn is required for project preparation alone. For this purpose, a Project
Development Fund (PDF) was created. This fund is used as a Revolving Fund and
would specifically be used for undertaking project development activities viz.
identification of projects, preparation of feasibility reports, detailed project reports
(DPRs) etc and its cost would be recovered from successful bidders.
To meet the project implementation costs, DMICDC will raise funds, allocate funds
and liaison between the Centre and six states. The land for the project will be
acquired by the respective state governments and would be considered as the equity
contribution of the State Government.
The Indian government has earmarked an amount of Rs 17,500 crore as project
implementation fund and Rs 1,000 crore as project development fund towards the
DMIC project. The funds are released to the Special Purpose Vehicles (SPVs)
formed between the State and the Central Government for each node being
developed in the State at Rs 3000 crore per node. The amount spent as on Feb
2016 is Rs 2,008 crore and Rs 310 crore under Project implementation and Project
Development Fund respectively.
The amount sanctioned by the government under project implementation fund is
mainly being used to build trunk infrastructure – non-profit-making but essential
needs like sewage pipes, water supply and roads. Trunk infrastructure is expected to

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comprise about 35-40% of the project, which will be funded by the DMIC Trust, with
the remaining project structured on a public private partnership (PPP) model.
Typically, the land prices surge once the basic infrastructure such as roads, water
and sewage pipelines, are built. This land can be sold at a premium to seek more
funding for completion of the project.
Apart from this, the Japanese government has also sanctioned a loan of USD 4.5
billion for the first phase of the project. This loan is available for a period of 40 years
at a nominal interest of 0.1%. This facility will be available through a Special Terms
for Economic Partnership (STEP) loan. This will bring Japanese funding, cutting
edge technology and knowhow into projects implemented in DMIC, especially trunk
infrastructure projects and transport connectivity projects which may not be
commercially viable in their initial stages.
However, this will meet only 10% of the funding requirement. A large chunk,
approximately 90% of the funds will have to flow from the private players. Private
sector investment is expected to come once the land prices rise post building of the
basic infrastructure.
Financial Structure of DMICDC
Source- EY
Cost Heads Estimated Costs Institution Funding Funding
Project preparation costs (preparation of
master plans, feasibility studies, etc.)
USD 2-2.5 Bn
DMIC Project
Development Fund
(Revolving fund)
->100% contribution from Govt. of India by way of a grant
->To be replenished from successful bidders of PPP projects
Project investments (initially un-bankable
projects like external infrastructure and
later banakble projects too)
USD 90-95 Bn
DMIC Project
Implementation Fund
->Set up as separate Trust with DMICDC as asset manager and
administrative support
->50% contribution from Govt. of India by way of grant
->50% contribution from Govt. of Japan by way of untied loans (USD
4.5 billion)
->Loans facilitated by DMICDC as a pass-through arrangements for
specific projects
Project investments (bankable projects) SPVs
->Land cost to be provided by State govts.
->PPP / private investments
->Market borrowings
Administrative costs DMICDC
->49 % equity by Government of India
->26% equity by Japan Bank for International Cooperation (JBIC)
->25% equity by indian Financial institutions

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Financing Framework of DMICDC
Source- EY
Some of the other options explored for funding DMIC have been mentioned below -
a) Public-Private Partnerships (PPP) via Viability Gap Funding (VGF). VGF is a
special facility to support the financial viability of those infrastructure projects,
which are economically justifiable but not viable commercially in the
immediate future. Financial grant up to to 20 percent of the project cost can
be availed under this mode. VGFs are expected to be rendered by the Asian
Development Bank (ADB) and World Bank, while loans will be provided to
infrastructure companies by India Infrastructure Finance Company Ltd.
(IIFCL).
b) DMICDC can also source funds from infrastructure financing companies like
IFCL and HUDCO. Apart from this DMICDC can explore other options such
as issue of land and infra bonds, sovereign funds and external commercial
borrowings
c) Funding from Multilateral Agencies such as Asian Development Bank and
World Bank. World Banks has already evinced interest in funding DMIC.
World Bank provides funds for major infrastructure projects at very nominal
rates and also follows very high standards in project execution.
Ensuring adequate availability of funds for implementation of DMIC will require
support from various stakeholders- state, central government agencies and private
investors (domestic and overseas)

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DMIC will be an essential component of India’s future economic development. Some
of the issues which are impeding the progress of the project are listed below -
1. Issues in land acquisition, environmental approvals, clearances, etc. - The
progress on DMIC has been affected by issues in land acquisition,
environmental approvals, clearances, availability of skilled manpower, trunk
infrastructure, etc.
a. Land acquisition remains a time-consuming and cumbersome process
requiring huge financial resources. Restriction on buying land is one of
the major hurdles that are holding up and affecting the progress on
DMIC projects. Land acquisition continues to be major road block and
government authorities are reluctant to acquire land in the current
environment. The effort of the government to make land acquisition
easier for DMIC could not succeed. The government was unsuccessful
in its attempt to exempt infrastructure initiatives from the mandatory
consent clause and the social impact assessment exercise.
b. No concrete steps have been taken for seamless movement of goods
between states within DMIC region like implementation of GST. The
delay in roll out of Goods and Services Tax (GST) is a concern. The
roll out of GST will eliminate inter-state taxes and create a common
market without any difference between interstate or intrastate sales.
This will help companies planning to set up units in the DMIC optimize
their supply chain strategy.
c. Policy issues and depleting gas supplies have impeded the progress of
setting up critical power plants along the DMIC. Non- availability of gas
has rendered power projects unviable in few states.
d. Cheap and reliable power is still not available in most states which is
major bane for industries. Development of DMIC includes power
intensive industries as SEZs, manufacturing plants and IT parks that
require large quantum of reliable power on continuous basis. The
authorities have not shown significant progress in enhancing power
generation capacities in the state to ensure power supply security and
a balanced regional growth in DMIC area.
2. Operational / Management issues - While the potential economic gains from
the project are enormous, there are unavoidable challenges facing it during
implementation. The sheer size and the complexities involved in the project
require it to be implemented in phases to ensure sustainability. The overall
rate of progress on the project depends critically upon the capabilities and the
interest levels of the DMIC states to proceed on their individual targets. Gaps
are already visible in this regard with some states performing better than the
others. States have experienced delays in project execution, partly on account
of difficulties arising from problems of co-ordination and land acquisition, in
addition to other procedural and administrative problems. Furthermore, there
is little ownership of state in DMIC, given that the project is undertaken by

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DMICDC. It has also been observed that the state development agenda and
priorities has taken precedence over DMIC. Apart from this, there is always an
inter-governmental tug-of-war going on between states and the central
government.
DMIC is multi-sectoral spread across multiple states and thus multiple
department, state agencies & municipalities. Involvement of multiple agencies
from central and state governments portends a major challenge for co-
ordination. The issues of co-ordination are not limited to those among Indian
agencies only. Being the country’s largest foreign-funded project, there are
issues in seeking effective co-ordination between foreign and domestic
agencies too. This is no less challenging given the imperatives of managing
tricky aspects such as differences in work culture and approaches to project
management. Further, legal hurdles are also emerging due to multiplicity of
agencies. Many foreign players are part of the project and regular disruptions
may discourage them to invest in the future.
3. Social and environmental issues- The DMIC is a huge and complex project
and may have significant environmental impact.
a. Water Sustainability: It is expected that the DMIC project will require
tons of natural water for industrial areas. This may lead to distress in
areas with inadequate water resources. Further, there is a fear that to
meet the water requirement for the DMC project, the existing water
supply meant for irrigation may be diverted for industrial use.
b. Food Security: Due to the change of extensive agricultural land to
industrial areas, local food chain including subsistence farming will be
affected significantly. That is, if a farmer loses an agricultural land for
subsistence farming, the family has to spend for foods additionally.
Further, once the land is sold for industrial use, the farmer may not
have an alternative employment opportunity.
c. Loss of Employment: Loss of employment of many farmers and related
workers will be increased due to the acquisition of agriculture lands.
Although an equal or more number of jobs will be created in the
industries that come up, the entire process may take time and also the
farmers and workers may not have the requisite skills to seek
employment in these industries.
d. Labor issues- Many Indian factories employ contract workers who
usually have lower wages, little or no health insurance, and no job
guarantee. With the government’s attempt at further labor market
‘liberalization’, workers at the envisaged factories in DMIC may be
subject to exploitation at the hands of industrialists. Apart from this,
there is an apprehension amongst the locals, that the factories along
the DMIC may prefer hiring migrant labors as they are less likely to
organize themselves to press for greater demands since they lack local
support structures. Furthermore, the industries along the DMIC may
adopt high levels of mechanization, and may not create as many jobs
as predicted.

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4. Investment issues- Private investment is not materializing as expected in
short-term. Private sector investment in DMIC may witness an uptick once
basic infrastructure such as roads, water and sewage pipelines, are in place.
Addressing the above issues will require active support from various
stakeholders including the state, central government agencies and DMICDC

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Conclusion
In many ways, the DMIC is a big boost that India’s infrastructure needs. This is not
only because it can significantly improve connectivity and bring down production
costs, it can also generate virtuous multiplier effects by augmenting employment,
industrial production and exports. The scales of these benefits are significant given
that the project will cover states that account for sizeable economic output and
transactions in India. These states account for almost 54 per cent of India’s gross
industrial output, 60 per cent of total exports and nearly half of total foreign direct
investment (FDI) inflows into India during the last decade. The states also cover
large parts of India’s road and rail networks. Major ports coming under the ambit of
the corridor cover roughly a third of total cargo handled across the country. The
DMIC states are also home to big chunks of India’s mineral resources.
Both foreign and domestic investors are keenly watching the progress on the project.
As connectivity improves and the proposed investment regions and industrial areas
are being developed, new opportunities are expected to appear in several industries
within the DMIC region. These include gems and jewelry, engineering, chemicals
and petrochemicals, oil and gas, textiles and apparel, food processing, IT/ITES, cars,
ship repairing/building, tourism and other knowledge-based industries.

30
About Resurgent India Ltd.
DEBT I EQUITY I ADVISORY
Resurgent India is a full service investment bank providing customized solutions in the areas of debt,
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acquisition, business and financial restructuring, valuation, business planning and achieving
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