Low cost loan offered in an attempt to outbid China

Japan offers $15bn loan for Indian bullet train rail line

Japan has offered India a $15bn loan at less than one per cent interest to construct its first bullet train between Mumbai and Ahmedabad.

The project to build and supply the route will be put out to tender, with China also expressing interest, but the offer of finance makes Japan the frontrunner.

Japan's decision to offer a loan of this size at such a low interest rate is part of its broader retaliation against Chinese involvement in infrastructure development in South Asia over the past several years.

The 505km corridor will link Mumbai with Ahmedabad, which is located in Prime Minister Narendra Modi's home state. Tokyo was picked to conduct a feasibility study on the project and concluded it would be technically and financially viable.

China has also been chosen to assess the feasibility of a high-speed train between Delhi and Mumbai, although the 1,200km route is estimated to cost twice as much and no loan has been offered so far.

"There are several (players) offering the high-speed technology. But technology and funding together, we only have one offer. That is the Japanese," said A. K. Mital, the chairman of the Indian Railway Board.

The two projects are part of a 'Diamond Qaudrilateral' of high speed trains over 10,000km of track that India wants to set up connecting Delhi, Mumbai, Chennai and Kolkata.

Officials say the Japanese loan should meet 80 per cent of the cost of the Mumbai-Ahmedabad project, although it is on condition that India buys 30 per cent of equipment including the coaches and locomotives from Japanese firms.

"What complicates the process is Japanese linking funding to use of their technology. There must be tech transfer," said Mital.

Should the new line be built, the journey time between the two cities will fall from the current seven hours to just two hours.

However, support for the new lines is not unanimous. A railway official is reported to have said: “Should we be committing all our resources to a single high-speed line? The railways have not attempted anything as big as this before in terms of costs."

India’s current rail system is known for having a poor safety record with an average train speed of just 54km/hour.

Last month, China won a contract, beating rivals Japan and Germany, to construct a 150km fast train rail link in Indonesia to connect capital Jakarta with the textile hub in Bandung.

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