It has just been a few weeks since Japan lost in a bidding war against China to build the first bullet train in Indonesia. Therefore, the Japanese government is now adamant in taking necessary precautions in ensuring that such history shall not be repeated once more.
As of today, Japan is the first and only country to have offered to finance the upcoming construction of India’s first ever bullet train.
However, the story of India’s inaugural bullet train project 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, the country with the fourth largest rail network, has been looking to build its very first bullet train between its two major cities separated by over 500km, Mumbai and Ahmedabad, ever since the second half of last year trying to cut down the current travel time of eight hours down to just two.
The Japan International Cooperation Agency (JICA) has worked hand in hand with the Indian authorities by conducting a feasibility study and leveraging their deep expertise in infrastructure development and technology.
The feasibly study came to the conclusion that the project was technically and financially viable covering several areas including traffic, funding pattern, tariffs, technology, number of stations, and so forth.
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 1.5x 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 Great Deal to Beat China
Japan’s proposal of financial support did not come as a surprise to Indian authorities as they have collaborated for some time now. What did come as a surprise was the terms and rates at which the loan was offered.
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 has received such a generous proposal from Japan is because China has threatened to become the number one infrastructure developer in Asia. Not only did they manage to edge out Japan in securing Indonesia’s first high speed rail, but they have also just won another contract in India to carry out a study on the technical and commercial viability of a high-speed train between the two cities of Delhi and Mumbai which are separated by over 1200km.
Japanese authorities said that the offer has already been made and their Indian counterparts are in the process of considering the deal. A decision is expected in the next few weeks.
This project is the biggest investment in infrastructure that India has ever considered and it is still quite cautious in carrying out 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’s bullet train contract.