Bilateral ties between India and Japan have always been on the fast track and it further gained momentum recently thanks to Tokyo’s financial and technological help in modernizing Indian railways.
On Friday, the two nations exchanged notes for Japan’s Official Development Loan Assistance (ODA) worth Rs 55,360 million ($828 million) for Chennai and Ahmedabad metro rail projects.
The Japanese government has committed ODA loan of about Rs 10,800 million ($161 million) for the Chennai Metro Rail Project (IV phase) and Rs 44,560 million ($666 million) for Ahmedabad Metro Project.
In October this year, Japan had offered to finance India’s first bullet train, estimated to cost $15 billion, at an interest rate of less than 1%, officials said, stealing a march on China, which is bidding for other projects on the world’s fourth-largest network.
Tokyo was picked to assess the feasibility of building the 505-kilometer corridor linking Mumbai with Ahmedabad, the commercial capital of Prime Minister Narendra Modi’s home state, and concluded it would be technically and financially viable.
The project to build and supply the route will be put out to tender, but offering finance makes Japan the clear frontrunner.
In September, China won the contract to assess the feasibility of a high-speed train between Delhi and Mumbai, a 1,200-km route estimated to cost twice as much. No loan has yet been offered.
Japan’s decision to give virtually free finance for Modi’s pet program is part of its broader push back against China’s involvement in infrastructure development in South Asia over the past several years.
“There are several (players) offering the high-speed technology. But technology and funding together, we only have one offer. That is the Japanese,” said AK Mital, the chairman of the Indian Railway Board, which manages the network.
The two projects are part of a ‘Diamond Qaudrilateral’ of high speed trains over 10,000 km of track that India wants to set up connecting Delhi, Mumbai, Chennai and Kolkata.
Japan has offered to meet 80% of the Mumbai-Ahmedabad project cost, on condition that India buys 30% of equipment including the coaches and locomotives from Japanese firms.
Japan’s International Cooperation Agency, which led the feasibility survey, said the journey time between Mumbai and Ahmedabad would be cut to two hours from seven.
The route will require 11 new tunnels including one undersea near Mumbai.
“What complicates the process is Japanese linking funding to use of their technology. There must be tech transfer,” said Mital.