Suraj wrote:Prasad wrote:No economist so didn't understand what you're saying here. We do have to repay them no? Or is it like a commercial venture that the japanese are doing with their own funding, pricing and exit strategy? If this is a loan to india/IR then its a humungous amount of money.
This is nothing more than FDI in a railway project. It's their venture, not ours. They front up the capital and technology, and in return require a minimum amount of product to be sourced from Japan (30-40% ?). They'll have a BOT arrangement of some kind to get back their investment, but it's not guaranteed that they will get it back, if ridership turns out to be lower than their calculations etc. There's no sovereign guarantee of the 'build this for us, we'll pay you back $X billion in Y years at Z% rate' kind. Companies invest in India and then make or lose money all the time. This is just one more FDI case. Another FDI in railways case was the recent awarding of the diesel loco plant to GE and the electric loco plant to Alstom.
Then, from where does this talk of .5 interest rate comes from. Fro what I have read, it is a loan and not FDI.
Japan has offered soft loan for the Mumbai-Ahmedabad bullet train project. The railway ministry is studying the conditionality of the loan which will involve transfer of technology and purchase of materials including coaches and locomotives.
“The discussions are on. Railway Minister Suresh Prabhu had last month discussed the matter with the Japanese government during his visit to Japan,” a high official told Deccan Herald.
The Japan is ready to fund 80 per cent cost of the project and wants India to purchase 30 per cent of coaches and locomotives from Japanese companies.
The railway ministry is evaluating the cost-benefit ratio of the project. According to officials, the rate of return on this Rs 98,000 crore project is estimated to be around 4 per cent. So, interest on the loan should not exceed this amount.