It’s been just a few weeks since Japan lost in a bidding war against China to build the first bullet train in Indonesia. So the Japanese government is now adamant in taking precautions to ensure that history will not be repeated. As of today, Japan is the first and only country to offer financing for high speed rail in India.
However, the story of India high speed rail and Japan’s support started long ago. Financial support is just the latest development in this prolonged relationship. Japan has been involved in nearly every step of the journey, from the inception of the concept to the current planning of the construction.
India, with the fourth largest rail network in the world, will build its first bullet train between Mumbai and Ahmedabad. For over a year, the government has tried to cut down the current travel time of eight hours.
The Japan International Cooperation Agency (JICA) has worked with Indian authorities by conducting a feasibility study, leveraging their deep expertise in infrastructure development.
The feasibly study concluded that India high speed rail was technically and financially viable in areas which include traffic, tariffs, technology, and number of stations.
The study proposed a revenue model that would effectively result in the world’s least expensive high-speed service with the fare probably priced at just 1.5 times the normal train on the same route to generate the highest amount of returns. The ideal amount of stations is estimated to be around 10 with a construction period of over 8 years.
Japan Offers Deal to Win India High Speed Rail Bid
Japan’s offer of financial support did not come as a surprise to Indian authorities. They’ve collaborated for some time now. The terms and rates at which the loan was offered did come as a surprise, however.
According to reports from officials closely involved in this deal, Japan stands to give 80% of the 15 billion USD project cost at an effective interest rate of less than one percent, conditional that the Indian authorities source at least 30% of the equipment from Japanese manufacturers.
One reason why India received a generous proposal from Japan is because China threatens to become the biggest infrastructure developer in Asia. Not only did they manage to edge out Japan in securing Indonesia’s first high speed rail, but they also won another contract in India. This time, to study on the technical and commercial viability of a high-speed train between Delhi and Mumbai. The two cities are separated by over 1200km.
Japanese authorities said the offer has already been made and their Indian counterparts are considering the deal. A decision is expected in the next few weeks.
This project is the biggest infrastructure investment which India has ever considered. As such, it’s still cautious about the deal.
Even though only the feasibility study has been completed, with Japan’s offer of such a sweet deal, there is not a single doubt that Japan is in the lead in this race for India high speed rail.
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