http://www.wsj.com/articles/indian-cabinet-agrees-to-pick-japan-for-high-speed-rail-project-1449744059
India Said to Pick Japan for High-Speed Rail Project
Planned bullet train would cost about $14.7 billion
By Rajesh Roy
Dec. 10, 2015 12:35 p.m. ET
NEW DELHI—Prime Minister Narendra Modi’s cabinet has approved the choice of Japan to build India’s first high-speed railway, an Indian government official said Thursday.
The multibillion-dollar deal comes as the two countries, Asia’s two largest democracies, have been strengthening ties in the last 18 months to build a counterweight to China’s growing influence.
It also would represent a boon for Japanese business, which has suffered embarrassing losses to China in bids for bullet-train contracts in
Indonesia and Thailand. That had alarmed officials in Tokyo, who worry that China is eclipsing Japan as the main economic partner for countries in Southeast Asia, in part by offering generous financing.
The high-speed corridor is a pet project of Mr. Modi, who is trying to modernize the Indian economy. The planned railway would run some 500 kilometers (310 miles) between India’s financial capital Mumbai and the western city of Ahmedabad, in Mr. Modi’s home state of Gujarat.
Under the Japanese proposal, construction is expected to begin in 2017 and be completed in 2023. It would cost about 980 billion rupees ($14.7 billion) and be financed by a low-interest loan from Japan, the Indian official said.
The deal, approved by the cabinet late Wednesday, was expected to be announced this weekend when Japanese Prime Minister Shinzo Abe travels to India to meet Mr. Modi.
However, cabinet approval is only the first step in a long process.
The project still faces numerous challenges and risks, including purchasing land and surviving the usual political fights that are part of India’s vibrant democracy.
Japan couldn’t confirm whether the cabinet decision had been made, a senior Japanese government official familiar with the negotiations said. “If the Japanese system is chosen, we would work hard to ensure its smooth implementation,” said the official in Tokyo.
The Japanese project in India is to be led by a consortium of Japanese companies, including
East Japan Railway Co. ,
Hitachi Ltd. and
Kawasaki Heavy Industries Ltd. , a consortium official said.
India depends on its extensive rail network to move people and goods. However much of it is inefficient, overburdened and outdated, acting as brake on economic growth.
Mr. Modi has pledged to expand and upgrade the network, opening it up to more foreign investment in the process. Last month’s $2.6 billion deal for diesel locomotives that went to
General Electric Co. is among the first to result from that push.
India this year increased its budget allocation for railways by more than 50%. Over the next five years it plans to spend more than $127 billion upgrading the network.
Mr. Abe has touted infrastructure exports as a pillar of his strategy to restore Japan’s economic growth, as well as to cement security and economic ties with Japan’s Asian partners.
In October, warships and aircraft from the
U.S., India and Japan practiced hunting enemy submarines together in exercises in the Bay of Bengal, signaling the their deepening relationships and rising concerns about China’s growing military and economic influence in the region.
China has been growing closer to many of India’s neighbors by backing big infrastructure projects.
—Mitsuru Obe contributed to this article.
