Russian Railways has signed a memorandum of understanding (MoU) with the Indonesian Government to build a railway line in the East Kalimantan province at a cost of around $2.4bn.
Under the project, a 275km rail line will be laid to connect East and Central Kalimantan and will be initially used to transport 15 million tons of coal a year.
East Kalimantan Governor Awang Faroek said the first stage of the railway line will be meant for coal transportation, which will be later used for transportation of crude palm oil, plantation harvests, rubber and people.
"To support the project, the provincial government has instructed local district governments to acquire land in the area," Faroek said.
The first phase will cover 183km starting from Balikpapan to Kutai Barat regency in East Kalimantan and is estimated to cost about $1.8bn. A further 60km will be built in the second phase of the project estimated at $600m, which will connect the line to the Murung Raya regency in Central Kalimantan.
Construction was expected to commence in 2013 and be operational in the first quarter of 20017.
When completed, the railway is expected to handle 20 million tons of coal a year in the first phase, and will be financed by private investors and Russian state development bank, Vnesheconombank.
The Russian investor will collaborate with the East Kalimantan provincial government-owned company Kalimantan Rail for the project, and sign a final agreement for the project by the end of this year, 2012.
According to reports, UAE-based MEC Holdings is also planning to build a 135km railway from Muara Wahau to Lubuk Tutung port in Bengalon, Kutai Timur in East Kalimantan, at a cost of IDR5tn ($560m), to transport coal.