India’s ambitious plan to construct the Mumbai-Ahmedabad high speed rail corridor reached a decisive stage on Tuesday, following the Japanese government’s offer to fund the Rs 988,050 million project at a low interest rate of 0.25% at Tuesday’s meeting of the Indo-Japan Joint Monitoring Committee (JMC).
The Japanese government’s loan offer comes with the rider that 30% of the rolling stock for the project would be sourced from Japanese firms, sources said.
A financial rate of return (RoR) of 4% and an economic RoR of 12% has been projected on what will be India’s first high-speed rail line, which is estimated to have a daily ridership of 40,000 passengers.
From the initial estimated cost of Rs 650,000 million, the Japan International Cooperation Agency (JICA) — which recently completed a feasibility study on the line — has indicated a substantial cost escalation by factoring in components including price escalation during construction (estimated at Rs 172,212 million ) and interest during construction (estimated at Rs 115,709 million). Basic capital cost has been projected at Rs 700,129 million in the draft JICA report.
If work begins in 2017, the line can be completed in 2023 and made operational in 2024.
In his budget speech in March, railways minister Suresh Prabhu had said that “quick and appropriate action” on executing the high speed project would be initiated after the submission of the JICA’s final report. The final report is scheduled to be submitted next month.
“China has also offered to fund the project. The political leadership will need to take a call on funding options,” a senior official said.