Japanese bullet trains to come at lowest-ever interest rate

India’s agreement with Japan for the ambitious Rs 98,000-crore bullet train project on the Mumbai-Ahmedabad route is not just about high-speed rail but also bilateral funding secured by India at negligible cost. The low cost, coupled with the 50-year tenure of the Japanese loan, makes it a major diplomatic achievement for the government.

“The loan comes with a repayment period of 50 years and with an interest rate of as low as 0.1 per cent. We have created history. This has never happened anywhere in the world,” Rail Minister Suresh Prabhu told Business Standard.

“In 50 years, India’s economy would be $20 trillion with organic growth of 7.5 per cent. We have to create the awareness in people that you can’t reach that level unless you invest in infrastructure,” he added.

The $12 billion deal for India’s bullet train network was among the key agreements India and Japan signed today, taking their bilateral strategic partnership forward during the visit of Japanese Prime Minister Shinzo Abe. Referring to the agreement, Prime Minister Narendra Modi said, “No less historic is the decision to introduce high-speed rail on the Mumbai-Ahmedabad sector through Shinkansen known for speed, reliability and safety.”

He also appreciated Abe’s “extraordinary” package of around $12 billion and technical assistance on very easy terms for the project. The Modi government had last year allowed 100 per cent foreign direct investment in the railways, paving the way for collaboration with global firms for India’s high-speed rail programme.

In a joint statement, the two sides agreed to take steps so that financial and technical assistance was provided by Japanese institutions. The Japanese loan is likely to account for 81 per cent of the project cost. The pact included cooperation on human resources and technology.

Prabhu said the larger benefits that would flow from the bullet train project could not be quantified. “It will create an entire ecosystem of opportunities as 85 per cent of the trains will be made in India. The spin-off benefit will be huge,” he said.

He added that the deal had come to fruition after a long period of deliberations between the two sides. “We proposed to Japan that we want a comprehensive partnership with them and they have agreed. They will assist in R&D also,” Prabhu, who completed a year as rail minister on November 9, said.

The Union Cabinet had last Wednesday given its go-ahead for the bullet train project. The 500-km line will be the largest foreign investment in the railways. The development comes as a setback for China, which had been aggressively pitching to partner India in building the planned 10,000-km network for bullet trains. China recently bagged its first foreign bullet train project in Indonesia, beating Japan by offering easy finance and technical assistance.