The Reuters article published by news outlets like Business Standard (Make in India on slow track as Japanese firms to drive bullet train project), The Economic Times (Blow to Make in India, Japanese companies grab all key contracts of Modi’s bullet train) or FirstPost (Jolt to Make in India? Japanese cos may bag $17 bn bullet train deal, local firms only to supply manpower) on January 18, 2018, gives the impression that no transfer of technology and knowledge-sharing is taking place on India’s first High Speed Rail (HSR) project (or the Bullet Train project) between Mumbai-Ahmedabad.
It has been argued in the article that Make in India is going to lose out as a result, not least because only Japanese companies are grabbing all the key contracts. But is this picture correct?
Let us check the facts as we know.
Standards & Personnel Training
To begin with, the fact is that the Japanese have shared their Standards & Specifications. This is now being finalised for the Indian HSR system. However, it has also been well-known that the Japanese are to train about 300-plus Indian personnel on Japanese HSR technology. Further, additional Indian personnel will be trained in an exclusive HSR institute being built at Vadodara. The details can be read in our earlier article: What the Bullet Train Brings to India and Where It Plans to Take India.
It is also a fact that the loan being extended by Japan for this project is special. The conditions are very favourable for India when compared to other ODA (Official Development Assistance) loans. Unlike ODA loans that lay down conditions on Japanese-led joint ventures to execute projects in India, there is no such pre-condition for the loan on the HSR project. (Again, the details are available in our above-mentioned article.)
Procurement & Work Division
The Reuters article also appears to convey the idea that most of the work (70%) will be undertaken by Japanese companies. This seems to be factually incorrect.
In fact, as per current estimates, procurement from Japan is to constitute about 18% of the direct project cost. This would be much less than the normal occurrence of about 30% Japanese components in various ODA loans.
Involvement of Indian Companies
When we come to the involvement of Indian companies, the fact is that the civil works for about 460 km are to be undertaken by Indian companies alone, without any preconditions for partnering with Japanese companies.
As it happens, the cost of the project’s civil works is in itself more than 50% of the direct project cost.
Remark by NHSRCL MD
The remark by the managing director of the National High Speed Rail Corp Ltd (NHSRCL) on the differences in culture and systems between India and Japan – as cited in the article — also seems to be only with respect to the challenges faced on the human engineering front. In other words, we are talking about the development of human resources once again.
Make in India
As regards Make in India, there are three ways of fulfilling the objectives of promoting Indian industry by the HSR project:
a) Formation of a JV between Indian companies and Japanese companies;
b) Japanese companies picking up equity in Indian companies;
c) Japanese companies setting up the manufacturing units in India.
As per sources, discussions are currently taking place. It has been learnt that the Indian side, under the aegis of the Department of Industrial Policy & Promotion (DIPP), and the Japanese government are facilitating the meetings of companies from both countries for the formation of the JV and so on. Thereafter, this is to be suitably incorporated in the conditions of the tender for achieving the objectives of Make in India.
The NHSRCL has also clarified that knowledge sharing and Transfer of Technology from Japan – for this HSR project — are taking place as a matter of fact. It has also clarified that both the Indian and Japanese sides are committed to ensuring Make in India benefits from this project.
Also read our earlier articles on the Bullet Train:
What the Bullet Train Brings to India and Where It Plans to Take India
Calling their Bluff: A Fact Check on Misinformation Being Spread About the Bullet Train