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Longest loan tenor, longest moratorium on repayment and lowest interest rate — these three terms define the finance extended by Japan to India for the Mumbai-Ahmedabad high speed rail in project, in context of Japan’s earlier loans to India in the rail-based sector.
The Japanese loan component of $12 billion has been worked out on one of the most attractive repayment terms at almost zero per cent – 0.1 per cent to be precise -- after pretty strong negotiations for the financing, with a 15-year moratorium on a 50-year repayment period.
The Delhi Metro and Chennai Metro projects had 30-year repayment tenor with interest rate of 1.2 and 1.4 per cent respectively, with 10-year moratorium period on repayment. Funds for freight corridor have been extended with 0.2 per cent interest rate and 40 years, with a year moratorium.
“The deal requires supply of eight-ten Japanese technology items such as rolling stock (train set), signalling and telecommunication systems. But this works out to be about 20-22 per cent, much lower than the extent of tied-component of 30 per cent in case of dedicated freight corridor,” explained a top railway official in the know.
According to an official statement, Japan has offered an assistance of over Rs79,000 crore. The loan is for a period of 50 years with 15 years moratorium with an interest rate of 0.1 per cent. The project is a 508 km line costing a total of Rs. 97,636 crore. Then the project is to be implemented in a period of seven years. It has been agreed that for the Mumbai – Ahmedabad HSR Project, Shinkansen Technology (Japanese high speed technology will be adopted. The cooperation of Japan on this project will also be fixed on transfer of technology and “Make in India”. Japan will assist India in training of personnel for high speed rail (HSR).
“The funding terms are very attractive. The long tenor will ensure that by the time the repayment starts, there is enough ridership between Ahmedabad and Mumbai,” Ajay Shankar, former DIPP secretary, who also heads a committee on public private partnership set up by the Indian Railways.
PROJECT STRUCTURING
The project structuring and administrative details will have to be worked out in the future. This was one of the fastest deals to be signed after JICA submitted the feasibility report in July.
“The project’s advantages can be captured better in a separate special purpose vehicle,” said Shankar. The project structure has to be made such that the benefits of increase in real estate costs can be ploughed back into the project, said another official source.
Along with the financing deal, there also other agreements related to the transfer of knowhow. For instance, Ministry of Railways and Japan’s Ministry of Land, Infrastructure and Transport on Technological Cooperation in Rail Sector have signed agreement that establishes areas for technological cooperation including sharing of information and best practices; exchanges of officials and technicians; facilitating the participation of other institutions, organisations and ministries and conducting joint research and studies.
Another agreement is related to the memorandum of understanding on technological cooperation between Research Designs and Standards Organization (RDSO) and Japan Railway Technical Research Institute (JRTRI). The memorandum proposes to cooperate in the areas of safety in train operation; advanced techniques of maintenance; use of environment friendly technologies, said an official statement.
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