Japan’s record loan keeps India’s freight network on track

The Japan International Cooperation Agency (JICA) has signed a loan with the government of India this week to help develop the country’s freight rail network, adding to what will be the largest amount of ODA loan ever allocated by Japan to a single project.

The loan, worth USD $18.5 million, will help build 552km of rail track for freight traffic in  the country’s “western corridor” between Delhi and Mumbai. It is the second phase of the Japanese-Indian collaborative Dedicated Freight Corridor (DFC) project. The total amount of ODA loan allocated to the DFC Project is also expected to be among the largest in the world.

It is hoped that the cooperative implementation of the DFC Project by Japan and India will become a new symbol of partnership between the two countries.

As part of this initiative, a dedicated freight railway line will be constructed, complete with fully automated signals and communication systems. The loan will also fund high-speed trains designed for freight transportation, as well as an initial review of the basic infrastructure design and tender preparation process.

In the context of years of impressive growth, the volume of freight traffic in India has increased at a rate of 15% per year since 1991. Developing and upgrading the railway system is therefore high on the agenda if the infrastructure is to keep up with further growth. JICA has played an integral part in supporting the development of India’s transport infrastructure as part of the Indian government’s 10th and 11th five-year plans (2002-2007 and 2007-2012 respectively). The latest plan has set the introduction of high speed freight trains and improved access to port facilities as some of the country’s top development priorities.

Back in 2005, then-Japanese Prime Minister Junichiro Koizumi made a joint statement during a visit to India in which he announced the Japanese government’s intention to support the development of India’s western freight corridor through a Japanese ODA loan. Sustained support was then provided for the formulation and initial implementation of the project, leading up to a USD $1 billion loan for the construction of the corridor’s first phase in 2009.

The DFC Project is an important part of “Delhi-Mumbai Industrial Corridor (DMIC) initiative”, which is a flagship Japanese-Indian collaborative project for comprehensive infrastructure development. The DMIC has been conceived to become India’s largest industrial belt by linking the industrial parks and harbors of the six states between Delhi and Mumbai in order to promote foreign export and direct investment – particularly those from Japan.