It’s been just a few weeks since Japan lost a bidding war against China to build Indonesia’s first bullet train. So the Japanese government is taking precautions to ensure history won’t 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 long relationship. Japan has been involved in every step of the journey, from the initial concept to 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.

Japan International Cooperation Agency (JICA) 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.

Studies proposed a model which would result in the world’s least expensive high-speed service, with a fare priced at just 1.5 times a normal train on the same route. The ideal number of stations is 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. However, the terms and rates which the loan was offered did come as a surprise.

According to reports, Japan stands to give 80% of the US$15 billion project cost at an effective interest rate of less than one percent. This is conditional on at least 30% of the equipment being sourced 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 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.

The feasibility study has only just been completed. But with such a sweet deal, there’s no doubt Japan is in the lead to build India high speed rail.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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