India clears Japan's bid for first bullet train ahead of Abe trip

Reuters/New Delhi

India's cabinet has cleared a $14.7bn Japanese proposal to build its first bullet train line, an Indian government minister and official said on Thursday, one of India's biggest foreign investments in its infrastructure sector.

The decision ahead of Japanese Prime Minister Shinzo Abe's visit beginning on Friday gives Japan an early lead over China, which is also bidding to build high-speed rail lines across large parts of India's congested and largely British-era system.

Japan had offered to finance 80% of the cost of the train linking financial capital Mumbai with Ahmedabad, the commercial centre of Indian Prime Minister Narendra Modi's home state of Gujarat, at an interest rate of less than 1%.

"It's been done," a government minister who attended the cabinet meeting headed by Modi late on Wednesday told Reuters.

An official in Modi's office confirmed the decision, saying there were some issues relating to the bullet train but that had since been sorted out in time for Abe's visit.

"We expect to make an announcement during the visit," the official said. Both the minister and the official declined to be identified.

Modi and Abe have forged a strong relationship, seeking to expand commercial and defence ties and push back against the rising influence of China across Asia.

Japan's International Cooperation Agency completed a feasibility study in July on the 505-km Mumbai-Ahmedabad corridor offering to cut travel time to two hours from the current seven to eight hours.

China was in September given the right to assess the feasibility of a high-speed train link between Delhi and Chennai, in the south, after getting clearances from India's security agencies wary of Chinese involvement in infrastructure areas such as telecoms and railways.

French and Spanish firms are also conducting studies into building two of the routes in a quadrilateral of high-speed train lines criss-crossing the country that would drastically reduce travel times.

A railway official said a panel led by Modi's adviser, Arvind Panagariya, had cited the accident-free record of the Japan's high-speed trains in its recommendation.

Lured by the scale of India's transport needs, foreign rail companies are aggressively campaigning to sell their technology and steal a march on rivals.

However, the government has not said how it would pay for the new lines if they eventually get the green light.