Bullet Train: Glamour Project Kicks Off

Raghu

THE bullet train project between Mumbai and Ahmedabad was formally launched by PM Modi and visiting Japanese PM Shinzo Abe at Ahmedabad last week. The project has been hailed by government and ruling party circles, corporates, the pink press and undoubtedly by sections of the middle-class who aspire to lifestyles in high-income countries and who fondly believe the myth assiduously propagated by ruling elites that the odd symbol in India of such standards of living will show the country and the world that India has “arrived.” The chorus of applause has been propelled by the project’s glamour quotient and a host of spurious but assertive claims about its merits, all designed to blind lay audiences and even seasoned analysts, and drown out reasoned voices pointing to real problems based on hard facts.

Critics of the project have questioned its viability, based on known information from other countries operating high speed rail (HSR), and have also therefore thrown doubt on whether HSR can or should be extended to other routes in India as is being considered. This raises further doubts on whether the new technology can at all be absorbed and wider industrial capability built in India along with new employment. If not, is India committing itself to building a white elephant which it will find difficult and costly to sustain over the longer term? There are also question marks over justification for the huge costs involved in building this tiny stretch of HSR, which will inevitably cater to elite mostly business travellers, at a time when the vast remaining railway network in India, catering to the overwhelming proportion of the travelling public, is crying out for significant expansion and upgradation, and a quantum jump in safety.   

Supporters of the project insist that with the low-interest loan provided by Japan, costs are not a major factor. They also maintain that the present project will have a multiplier effect and create many new jobs. While agreeing that the existing railway system has many needs, they feel these should not be counterposed against HSR as an either-or proposition. Proponents also deny that this would be an elitist project, and demand that what they perceive to be unnecessary negativism be dropped when India is marching towards a brighter future.

So let us leave out ideological and ethical issues, and look cold bloodedly at the evidence.    

PROJECT DETAILS

The project itself is for a high-speed rail system over about 508 km between Mumbai and Ahmedabad with 11 halts, four in Maharashtra (Mumbai, Thane, Virar, Boisar) and eight in Gujarat (Vapi, Valsad, Surat, Bharuch, Vadodara, Anand and Sabarmati/Ahmedabad). The route and halts, leaving out a Pune-Mumbai section proposed earlier in 2011 when a pre-feasibility study was conducted for a 650km line, ostensibly due to high costs in the ghat sections, have led to some disinterest in Maharashtra and charges of biased political considerations favouring a particular state, Gujarat, a common problem in railway projects in India which the bullet train project does not seem to have escaped. The Gujarat government has therefore also committed to joint funding of some important aspects of the project related to component manufacture within the state.

Almost the entire route would be on elevated tracks, except 21km in the Thane-Virar section being underground including 7km under the sea. The train is likely to have between 6 and 10 coaches, carrying 1300-1600 passengers. The Mumbai to Ahmedabad journey is expected to take 2 hours 8 minutes for the rapid service where the train stops only at Surat and Vadodra, and 2 hours 58 minutes for the slower service where all 12 stops are covered. However, these times are estimated based on a maximum speed of 350kmph whereas the operational maximum speed is expected to be around 320 kmph with average speeds between 220 and 250kmph. The current fastest non-stop Duronto service between the two destinations is just under 7 hours. The HSR service is expected to provide roughly 35 round trips per day, 3 services per hour during peak hours and 2 services in off-peak hours.

 

COSTS      

Total costs for the Mumbai-Ahmedabad HSR project is estimated at Rs 1.1 lakh crore (US$ 17 billion). Of this, Japan will provide Rs 88,000 crore (US$ 14) at 0.5 per cent interest rate over an extended period of 50 years, with payments to begin after 15 years if required.

This has been described by none other than the prime minister as being “almost free.” Financial analysts have pointed out it is not. Taking into account exchange rates between the rupee and the Japanese Yen, and the comparative inflation rates between the two economies with Yen inflation being near zero, the repayment amount could rise to around Rs 1.5 lakh crores over 20 years. And this does not account for delays and any rise in costs which have typically occurred in most infrastructure projects in India.

Japan also stands to gain in many other ways. Almost all the equipment, covering a substantial proportion of the project cost, is to be procured from Japanese manufacturers under the India-Japan agreement for the project, really a condition for the investment by JICA, the Japanese agency funding the project. An earlier Indian idea to float competitive bidding was ruled out by Japan.

However, some technology transfer and component manufacture in India is built-in to the project. The only silver lining is that much of the rolling stock will be made in India by public sector behemoth Bharat Heavy Electricals Ltd (BHEL).

Clearly, this is an extremely expensive project, working out to around US$ 27million per km, comparable to European costs but higher than costs in China. To put this into perspective, last year’s railway budget projected an expenditure roughly equivalent to the total cost of this single, relatively small HSR project, for undertaking upgradation over the next year of the rest of India’s massive railway network of around 120,000 km of track. Can India really afford this, and should it really spend this huge amount on a single vanity project?

Under the earlier UPA dispensation, feasibility studies were conducted for nine more such HSR routes. The BJP election manifesto in 2014 promised a “golden quadrilateral” of HSR routes connecting all four metro cities in the north, west, south and east, and covering around 6,000 km or roughly 120 times the length of the present project. If 500-odd km of HSR costs Rs1 lakh crore… readers can do the math!

In comparison, the conventional rail network stretching over 120,000 km of track and around 77,000 km of routes is badly in need of upgradation, expansion and double-tracking, not to mention safety measures, all expected to cost around Rs10 lakh crores (US$ 140 billion) till around 2020. The railways is also slowly embarking on track, rolling stock and loco upgradation on selected routes, looking to increase speeds of trains such as the Rajdhanis from 120 km to around 200 km. This could be the way to go rather than HSR. One lakh crore for Mumbai-Ahmedabad bullet train, and 10 times that for around 250 times the length of non-HSR track?

Unfortunately, most of these and other recent upgrades too look only to cater to middle-class passengers travelling in super-fast or air conditioned coaches, where fares can be raised in the quest to recover costs. The bulk of the low-income travelling public, accounting for over 94 per cent of rail passengers and who travel in second sleeper class or unreserved coaches, continue to languish in slow, low quality and uncomfortable trains, and are viewed by the government, railways’ management and their advisors as a burden and a drag on the railways’ viability.

Is the government thinking of the common rail passenger at all? Or is everything only about swank, glitter and making the 5 per cent of upper class rail passengers and others of this income category feel good?  

VIABILITY

In the case of HSR, though, it is this elite upper-income passenger who is likely to be a financial drag on the railways.

Likely tariffs for the Mumbai-Ahmedabad HSR project have not yet been officially announced. A figure of Rs 3000 or roughly one-and-a-half times AC first class fare has been bandied about for an ordinary HSR seat, while business class seats would obviously entail a further premium. However, reliable sources have stated that the detailed project report speaks of fares around Rs 4300 and that senior railway officials are speculating at fares between 4,000 and 5,000.

A study conducted by IIM Ahmedabad estimates that around 100 trips daily carrying 90,000 to 120,000 passengers daily would be required to break even. Internationally, it is estimated that around 25 million passengers annually are required for viability. These numbers are way higher than the 70 trips planned daily on the Mumbai-Ahmedabad HSR, and adding more coaches (as is being projected only to make passenger capacity appear higher than it actually would be) would only slow down the bullet trains.

HSR also has to compete with the rapid growth and relatively low fares of passenger air services, a problem even non-HSR air conditioned services already face today, losing a substantial chunk of AC-class passengers to air services. Mumbai-Ahmedabad air fares can be as low as Rs 2000! HSR services in Europe are believed to compete reasonably well with air services because of time saved by rail services between city centres, compared to additional time required for travel to and from more distant airports, especially for budget carriers. This is not such a problem in most Indian cities.

Passenger air travel is growing at scorching rates of around 20 per cent per year, while non-HSR AC rail passengers are growing by only a lukewarm 5 per cent. Passenger air traffic which was only 50 per cent of AC rail traffic in 2014-15 grew to 70 per cent during the latter half of 2016. The railway minister’s attempt to reassure the travelling public that bullet train fares would be made “affordable to all” is, contrary to his intention, is not at all comforting. It suggests that bullet train fares would be kept artificially low, in other words subsidised, the very opposite of current trends in the railways and indeed in social and welfare spending. But this should not surprise anyone, coming from a government which is subsidising regional passenger air services. As everyone knows, subsidies are a very bad thing – except when given to the rich and privileged!

INTERNATIONAL EXPERIENCE

This trend is in fact well known from the experience of most countries with HSR who have struggled with viability issues. In fact, the government’s frequent claims that India will join the ranks of the developed world by also having an HSR service in India flies in the face of the fact that several high-income developed nations either do not have HSR or have had serious difficulties with it, as has been the experience of many middle-income countries

The US wrestled with the idea of HSR for long and has reluctantly finally decided on an HSR service on the San Francisco-Los Angeles route, earlier having also considered the  Philadelphia-Boston-New York-Washington DC route. Both routes are high-density routes that would rank among the top ten if they were independent countries, connecting industrial-commercial cities with plenty of business passengers. Japan’s Shinkansen HSR carries over 30 million passengers annually and traverses a route with around 50 per cent of the country’s population. South korea’s Seoul-Busan corridor similarly covers 70 per cent of that country’s passengers. France’s Paris-Lyon route carries a number of passengers, but has been receiving substantial subsidies over the years.  

China, of course, breaks all norms and records. It has over 20,000 km of HSR. While reliable figures are hard to come by, it has been widely reported that the state-owned and operated Chinese Railways has run up an internal debt of over US$ 300 billion and has reduced fares about 10 times to make the service more affordable.

Taiwan is struggling with its HSR service between capital Taipei and Tainan city covering virtually the whole island north to south. The service was set up in 2007 at a cost of $14 billion and, with the operator on the brink of bankruptcy by 2014 and only 50 per cent of the projected passenger traffic being actually realised, had accumulated losses of over $1 billion and had to be bailed out by the government.

Argentina gave up on HSR even before starting. Construction of a Jakarta-Bandung HSR line is underway in Indonesia. Turkey runs an Istanbul-Ankara HSR but operates only 12 trains daily and its viability at present is not known.

India would be the lone low-income country to operate an HSR line, that too against the known experience of poor viability except in a few, very high density high-income countries. Project proponents, especially government and ruling party spokespersons claim, without advancing any evidence or arguments, that all these fears are unfounded and that “dreams will always triumph over doubts and scepticism.” Question is – is this vanity worth the highly expensive gamble India has taken?

 

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