The Indian cabinet has approved an Rs17,700 crore (approximately $3.7bn) loan from Japan to finance the first phase of its planned north-west rail freight corridor project.

The loan will be provided by Japan’s Official Development Assistance programme, on the condition that Japanese firms are selected as prime contractors for the project and at least 30% of the project equipment is sourced from Japanese companies.

The loan will be used to build the 920km western segment of the corridor from Rewari in Haryana to Vadodara in Gujarat.

The Dedicated Freight Corridor will cost a total of Rs26,124 crore (approximately $5.4bn) and will connect Delhi’s Tughlaqabad and Dadri inland ports with Mumbai’s Jawaharlal Nehru seaport, running via Haryana, Rajasthan, Gujarat and Maharashtra. It is expected to be completed in 2017.

The project is part of the government’s five-year $500bn transport infrastructure development plan.