Mumbai-Ahmedabad Bullet Train: Is Japan’s Tied Loan a Benefit or a Burden?

By GULSHAN RAI KHATRI

The Mumbai-Ahmedabad Bullet Train project’s Japanese loan offers an exceptionally low interest rate and long repayment period, but its tied procurement condition has raised questions over competition, costs and delays.

New Delhi, August 11, 2026 — The Mumbai-Ahmedabad Bullet Train project, under construction for nearly nine years, is once again in the spotlight. The project has fallen behind its original schedule, but the government is now preparing to begin train operations on a section of the corridor from next year.

However, the first trains will reportedly not operate at the planned speed of 350 kmph. Instead, operations are expected to begin with an indigenous train capable of running at around 250 kmph.

The question is why a project involving such massive expenditure has been delayed for so long and why it has repeatedly encountered roadblocks.

Land acquisition was one of the major reasons for the initial delays. But delays related to trainsets and signalling are now also being attributed, at least in part, to Japanese companies, which have reportedly been slow in supplying equipment and have quoted relatively high prices.

This has prompted India to turn to state-owned Bharat Earth Movers Limited (BEML) to manufacture indigenous trainsets for the project.

Why is the Japan loan structure different?

This is not the first time India has used a loan from Japan’s Japan International Cooperation Agency (JICA) to develop major transportation infrastructure.

Since 1998, JICA has been a reliable partner for India’s metro projects and has regularly provided loans, particularly for the Delhi Metro and other urban transport projects.

But why has the Bullet Train project repeatedly run into difficulties?

The fundamental difference lies in the structure of the loans provided for metro projects and the Mumbai-Ahmedabad Bullet Train project. The difference concerns both the interest rate and procurement conditions.

For the Delhi Metro and other metro projects, JICA loans have generally carried interest rates of around 1.2% to 1.4%. Such loans typically come with a 10-year grace period, during which repayment instalments are not required. The repayment period thereafter can extend to 30 years.

Typically, JICA financing for metro projects accounts for around 40% to 50% of the overall project cost.

The financing structure for the Bullet Train project, on paper, appears substantially more favourable.

The interest rate was kept extremely low at 0.1%. The grace period was extended from 10 years to 15 years, while the repayment period was extended from 30 years to 50 years.

Moreover, the JICA loan covers more than 80% of the project’s cost.

Looking purely at these terms, the Bullet Train loan appears considerably cheaper and easier to service than the loans used for metro projects.

But there is a catch.

Bullet Train Project: Undersea Tunnel Section Opens in Milestone

What is a tied loan?

The Bullet Train loan comes with a condition known as a tied loan.

A tied loan essentially means that equipment, machinery and other goods required for a project financed through the loan have to be purchased from companies in the lending country — in this case, Japan.

This is different from the financing structure used for metro projects, where such a procurement restriction does not necessarily apply. Metro companies can procure equipment from suppliers in different markets.

The tied-loan condition can therefore give Japanese companies a significant advantage in supplying equipment for the Bullet Train project.

Had the Bullet Train loan not been tied, as with the procurement arrangements associated with metro projects, India could have sourced technology, equipment and other project components from suppliers across the world.

An open tender process could have encouraged competition among suppliers. That, in turn, could potentially have resulted in lower procurement costs and allowed project authorities to select equipment based on technology, price and performance from a much wider international market.

The tied-loan arrangement, however, has increased India’s dependence on Japanese companies for critical Bullet Train equipment.

Cost rises 83%

Land acquisition took considerably longer than initially anticipated and was the principal reason for the early delays in the project.

Subsequently, delays in equipment supplies by Japanese companies also contributed to the project’s difficulties.

The result is a substantial increase in the estimated cost of the Mumbai-Ahmedabad Bullet Train project.

According to the latest project assessment cited in the analysis, the estimated cost has risen by about 83%.

The project was initially estimated to cost around Rs 1.08 lakh crore. The revised estimate is now around Rs 1.98 lakh crore.

The rise in cost has added to the debate over whether the apparently attractive financing terms attached to the Japanese loan have translated into an equally cost-effective project overall.

Why India turned to BEML

Trainsets for the Bullet Train project were originally expected to be sourced from Japanese companies. However, the trainsets under consideration were reportedly not available as required.

This has led India to turn to BEML for the manufacture of trainsets for the project. The signalling system is also being developed in accordance with the new trainset arrangement.

The initial plan is for the indigenous trains to operate at around 250 kmph. They are subsequently expected to be upgraded to achieve speeds of up to 350 kmph. The Bullet Train project therefore presents an interesting contradiction.

On one hand, India secured an exceptionally low-interest loan with a long grace period and an extended repayment schedule. On the other, the tied-loan condition restricted procurement and increased dependence on Japanese suppliers.

The larger question is whether the financial savings achieved through highly concessional financing can outweigh the potential costs associated with restricted procurement, delays and limited competition.

For India’s future infrastructure projects, the experience of the Mumbai-Ahmedabad Bullet Train corridor could become an important case study in evaluating not only the headline interest rate of a foreign loan, but also the conditions attached to it.

(This is an opinion piece. Views expressed are the author’s own.)

India’s First Bullet Train: ETCS, BEML Trains and the Debate Over Rolling Stock

Follow The Raisina Hills on WhatsApp, Instagram, YouTube, Facebook, and LinkedIn

About The Author