The Telegraph
Since 1st March, 1999
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Japan weighs $2bn rail loan

New Delhi, Jan. 28: Japan may offer a yen loan of about $2 billion for the Delhi-Calcutta and Delhi-Mumbai phases of the railway freight corridor project, according to senior officials of the Railways. The Japanese team has submitted an interim report on the project that involves an investment of Rs 20,000 crore.

The officials, however, said the exact loan would be known only after the Japanese International Cooperation Agency (Jica) submitted its final report in October.

The Japanese are doing their own assessment of the project, while the Railways are preparing a separate feasibility report.

A senior railway official told The Telegraph that the Railways is inclined towards a debt-equity ratio of 2:1 for the special purpose vehicle (SPV) to implement the project. The Railways would contribute Rs 5,400 crore equity towards the SPV. However, this may go up if financial institutions do not pick up their share of the equity.

The official said the Japanese, after their interim assessment, have veered towards an exclusive freight corridor from their initial preference for a passenger-cum-freight corridor.

“The Japanese are meticulous about meeting deadlines and their team is proceeding at a frenetic pace,” the official said.

The Japanese soft loan, however, has a rider — a significant portion will have to be used on railway equipment from Japan.

Senior officials said the percentage of the loan for railway equipment, such as locomotives and signalling equipment, from Japan could be as high as 30 per cent.

The Japanese want the long-term loan to have backward linkages with their own economy. They want to ensure that this railway project in India will boost industrial production and employment in Japan. However, the country has a world-class railway system with the best in locomotives, signalling equipment and rolling stock at its disposal.

The officials said Japanese technology and equipment would help embrace the new technological paradigm required for the project. However, some hard bargaining is necessary to get the equipment at the right price.

The Railways also desperately needs funds. The comptroller and auditor-general of India has said in a report to Parliament this year that 107 of the 133 gauge conversion and new line projects taken up in recent years are not financially viable. The total outlay on these projects is Rs 54,716 crore.

Sources said though the Rail India Technical and Economic Services (RITES) has prepared a detailed feasibility report, the Japanese will not depend on this estimate. They will make their decisions on the basis of their own feasibility study.

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