Don't Make in India? Japanese Steel, Engineering Firms Likely to Bag $17 Million Bullet Train Contracts

The Japanese have reservations on certain issues because they have a concern that there is a difference in the culture and systems of Japan from the culture and systems in India, say those in charge of the bullet train project in India.

New Delhi/Tokyo: Japanese steel and engineering companies are in the driver's seat to bag major supply contracts for the $17 billion bullet train project in Gujarat, several sources said, undermining a key component of Prime Minister Narendra Modi's economic policy - a push to 'Make in India'.

Japan is funding most of the project, and Japanese companies are likely to supply at least 70 percent of the core components of the rail lin

Nippon Steel and Sumitomo Metal Corp , Japan's biggest steelmaker, and other companies like JFE Holdings Inc , Kawasaki Heavy Industries Ltd , Mitsubishi Heavy Industries Ltd , Toshiba Corp and Hitachi Ltd are likely to bid for various contracts, said three senior Indian government officials directly involved in the project.

Nippon Steel said it would not comment on specific projects.

JFE, Hitachi and Toshiba said they were interested in the project but had not finalised plans, including any possibilities of joint ventures with Indian firms.

Mitsubishi Heavy said it had not decided if it wanted to be involved.

The sole collaboration aimed at the bullet train project is between Kawasaki Heavy Industries and India's Bharat Heavy Electricals Ltd , which aims to win carriage orders.

Japanese government officials have asked for more bullet train corridors in India before transferring technology, three senior Indian officials said.

But New Delhi is unlikely to announce any new projects until the final cost and commercial feasibility of the Mumbai-Ahmedabad link is clear, the officials said.

"It's like a chicken and egg situation on technology. The Japanese want an economy of scale and business but the Indian view is that India is a big market that once this market is explored the business will automatically be generated," said Khare from NHSRCL.

MISSED OPPORTUNITY

New Delhi has tried to help Indian steel companies grab a slice of the pie.

The Indian government last year mediated negotiations between Nippon Steel and India's Jindal Steel and Power Ltd to set up a joint venture to manufacture rails, but the talks fell through after the Japanese major raised quality concerns, three sources in New Delhi said.

State-owned Steel Authority of India (SAIL), which for decades has been the main supplier of rails to Indian Railways, was also overlooked by Japanese companies due to quality concerns, the sources said.

Nippon Steel declined comment and while Jindal and SAIL did not reply to e-mails seeking comment.

Left with little choice, Indian firms will now largely provide raw materials like cement and supply manpower for the assembly of rails, the sources said.

India's UltraTech Cement Ltd , Larsen & Toubro Ltd , Bharat Heavy Electricals Ltd and Ambuja Cements Ltd are among those in the race for the supply of construction materials and power, the two Indian railways officials saide, said five sources in New Delhi with direct knowledge of the matter.