Japan Vies for $10.5B Indian High-Speed-Rail Project
Japanese rail companies, once considered high-speed-rail pioneers, have allowed Chinese rivals to overtake them to win more major contracts in recent years. Suddenly, though, Japan is aiming to gain back lost market share by competing against China on a new, unexpected battlefield: India.
This September in Tokyo, for instance, Japanese Prime Minister Shinzo Abe shook hands with his Indian counterpart, Narendra Modi, on a plan to build a $10.5-billion bullet-train project in India. Plans for the ambitious rail line include two major cities, Mumbai and Ahmedabad, in western India.
With top speeds of between 250 to 300 kilometers per hour, officials estimate the bullet train could cover the 534-kilometer-long stretch between Mumbai and Ahmedabad in about three to four hours—or less than half the time of the existing express-train service.
To get the project rolling, Akihiro Ohta, Japan's minister for land, infrastructure, transport and tourism, has expressed a willingness to fund the massive project. The Japan International Cooperation Agency (JICA) has partnered with French railways to carry out feasibility studies on the project. India's Ministry of Railways has said it will take six years for the project to complete.
The high-speed-rail line would be a significant first for India as well as an opportunity for Japan to prove it can work within the limitations of a developing market and still compete on price.
"From what we know, Japan is ready to work at a rate of $17 million per kilometer,” says Rajeev Jyoti, chief executive at the railway division of Larsen & Toubro, a major Indian contractor. “This is not really extravagant, going by the usual costs on similar projects. The cost can be brought down further if Indian companies are given a piece of the action."
The government’s railway department and private Indian companies are capable of handling many aspects of the project. For instance, Bombardier’s Indian branch is producing the engines for electric trains, says Jyoti, who previously led the firm.
"The project is extremely feasible," adds Tuhin Chatterji, a senior official with the Confederation of Indian Industry. "The train route passes through one of India’s most industrialized areas."
The bullet-train project is part of a larger railway modernization program that has been undertaken by the new government, which also has broadened the scope of foreign direct investment in this sector. The Indian government already has tasked Japanese firms with constructing a 1,483-km-long Western Dedicated Freight Corridor, which will connect the capital of New Delhi with Mumbai.
Among the foreign companies in India, General Electric, Caterpillar-owned Electro-Motive Diesel and Alstom of France are looking to score some railway-modernization contracts.
Challenges
Nevertheless, in India, poor project management and implementation delays are not uncommon, due to inefficient bureaucracies, a confused decision-making process and the difficulty of acquiring land, among other factors. On this project, however, land acquisition may be less challenging because the new route may run parallel to existing tracks.
The French railway is advising on development and the project-management structure. Most observers believe the Indian government will use a new company, instead of the Indian Railways transport agency, to oversee the project.
"The management should be given to an organization outside the Railway Board to ensure the project is successful," says Vijay Raina, an independent consultant who formerly served as an officer at the rail agency. "Many stringent and cumbersome rules, like the rules on procurement, must be changed because [they] become bottlenecks on some occasions."
Similar approaches have proven successful in the past in India. For example, the Delhi metro rail and the separate Konkan Railway function under independent management structures.
Another challenge involves the project’s financing. India needs to consider how it will repay the Japanese loan as the return on investment may lag until the bullet train triggers the expected economic development along the route. Also, previously, Indian passengers have resisted paying higher ticket prices.
JICA has submitted a preliminary report on the bullet-train project. Two more reports are expected by June, according to Railway Board Chairman Arunendra Kumar.
Japan vs. China
Success in India would pave the way for Japanese rail makers to join the battle against aggressive Chinese companies in other parts of the world. For instance, Japan recently has expressed a desire to bid for a Singapore-Malaysia bullet-train project.
However, China has thrown its hat in the ring on India's high-speed-rail project, proposing a design that combines competitive prices and high standards.
"We are very confident that we are stronger than [Japan] in the field of railways," said senior Chinese railway official Zhou Fangyuan in September. “We have the competitive advantage in the sector of building high-speed rail.”
In fact, India and China have commenced initial talks for another high-speed-rail project that would connect New Delhi with the southern city of Chennai. In a separate case, a proposal for the 500-km-long Chennai-Bangalore-Mysore corridor seeks to double the current speed of 80 km per hour—another project likely to go to Chinese railway builders.
"We will work with multiple partners,” Ashok Kantha, India’s ambassador in Beijing, told ENR. "China can bring to India its expertise and the experience it has gained building a quality rail network in a short period."
China has another reason to woo New Delhi: India has not given its approval to Beijing’s plans to link up the entire region with roads and railroads under its Bangladesh-China-India-Myanmar program.
Through this proposal, China wants to build new routes to move cargo, acquire new business for its construction firms and finally gain access to the Indian Ocean through Myanmar, sources said.
