With help from Japan, Centre-state joint venture to usher in first bullet train

The approval given by the Cabinet makes it possible to execute this project under the provisions of the existing Railway Act, 1989.

Written by Avishek G Dastidar | New Delhi | Updated: December 12, 2015 8:00:10 am
japan, bullet train, bullet train, india bullet train, japan bullet train company, india news, japan news, latest news Japanese Prime Minister Shinzo Abe with Harshavardhan Neotia, president elect, FICCI (right) and CII president Sumit Mazumder (centre) at the Japan India Innovation Seminar, in New Delhi, on Friday. (Source: AP)

A new organisation, created out of a Centre-state joint venture like the DMRC, will implement India’s first bullet train project from Mumbai to Ahmedabad with Japan’s assistance, MoU for which is going to be signed between the two countries on Saturday.

The approval given by the Cabinet makes it possible to execute this project under the provisions of the existing Railway Act, 1989. This excuses Railways from having to go to Parliament to enact a law for high-speed train. This saves the project from possible delays due to parliamentary procedures. Moreover, it has been understood that giving states a stake in the project was essential for success.

A three-member empowered committee comprising chairman, Railway Board and secretaries of Department of Industrial Policy and Promotion, and Department of Expenditure, will take the necessary decisions after discussions with the Japanese. Sources said this model of execution was finally setting the template to be followed by all the subsequent bullet-train corridors in the Diamond Quadrilateral.

Not only is Japan giving 81 per cent of the Rs 98,000 crore project at just 0.1 per cent, negotiators from Railways have ensured that the deal is much more sweeter than it had in the case of Dedicated Freight Corridor, which had many restrictive strings attached for India.

Besides being cheaper, the bullet train loan gives India freedom to carry out civil construction sans Japanese participation—a crucial change to ensure speedy award of tenders and fast execution unlike in the DFC.

For the first time, Japan has agreed to distinguish between civil and system contracts. System contracts are those involving installation of signaling system, key safety apparatus, rolling stock etc. “The DFC experience was crucial while negotiating the deal with the Japanese. Since the DFC loan, worked out several years ago was the first such loan in the country, India was not aware of the impact of the various clauses. …we are now a bit wiser in assessing and bargaining the terms. It is a win-win deal for both sides,” said a senior government official. India’s will buy the entire rolling stock from Japan—the new version of the Shinkansen—while Japan has insisted that certain “prime contractors” from Japan are a must in the system contracts which are crucial for safety features like the Shinkasen.

These features of the assistance significantly lower the monetary impact of the clause that 30 per cent of the sourcing should be done from Japan. The grace period of the 50-year loan is 15 years and Japan has agreed to partner in areas like setting up technical training centres for skills upgrade. Around Rs 70,000 crore is the cost of construction, while Rs 6,000 crore has been worked out as eventual cost of rolling stock (the trains).

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