Will This Bullet Too Bite The Dust?
Several financial tools exist to determine the viability of a Project over a period of time. Viability means the total cost of a project must be less than the total benefits. A simple way would be to add the costs and then add the expected revenue and savings over the project’s life cycle. The Bullet train project of the Government of Maharashtra must also be evaluated on these terms before it is consigned to history. How prudent is the recent decision to review the Mumbai-Ahmedabad Bullet Train project in view of a staggering Rs 6.70 lakh crore debt burden on the state? Such decisions which can affect the credibility of a Nation must be handled with more sensitivity. A bullet train is a symbol of machismo of the country and boasts of its economic prowess. However it is also a fact that most of the cost is incurred at the beginning whereas most of the revenue accrues with several years lag.
The Country has a large road network spanning more than 5.0 million km, transporting 65% of all goods in the country and 80% of India’s total passenger traffic. According to Petroleum planning and analysis cell (PPAC), India spent USD 111.9 billion on oil imports in 2018-19, up from USD 87.8 billion in the previous fiscal year and USD 64 billion in 2015-16. This is a whopping 84% of import dependence and must come down, if economic progress must be made, especially when consumption is growing with domestic output remaining stagnant.
Gridlocks and traffic jams cost us at least USD 50 billion annually in wasted time and spent fuel. Air transportation delay costs are estimated between USD 20 billion and USD 30 billion a year though it is extremely difficult to estimate the sunk cost and the maintenance cost of the existing transportation network.
Cutting down on vehicle numbers will ease traffic, save money, reduce pollution, slow global warming and whittle down the oil import bills. Slow moving transport and high energy bills are the headwinds that the economists fear. What are the alternatives? Electric vehicles and high speed transportation are some answers. High speed rail will be more competitive and better positioned to attract tourism, businesses, jobs, and high quality personnel in future for they deliver fast, efficient transportation operating in all weather conditions. They spur economic growth, mixed-use real estate development in second-tier cities along the train routes, broaden labour markets and offer workers a wider network of employers to choose from. They enable growth of technology clusters with fast and effective access between locations and expand consumer markets.
The existing infrastructure of airports and highways have seen an investment of at least two trillion dollars in aggregate. Several billions must have also been invested in Interstate Highway Systems. The government recently announced an investment of 60 Billion Dollars to build 100 new Airports. Because we need to keep everything moving, we’re also committed to spending 10% of the investment annually just to maintain surface transportation at the existing level of service. Add an expected demand growth from rising populations, and some much-needed upgrades, the costs would certainly be billions more annually.
What are the metrics? The estimated cost of the high-speed rail project, including that of rolling stock, is almost Rs 1.1 lakh crore, of which 81% is to be funded through a loan from the Japan International Cooperation Agency (JICA) at a nominal interest rate of 0.01%, payable for a period of 50 years, starting 20 years later. The remaining will be paid by Maharashtra and Gujarat amounting to Rs 5,000 crore each as equity through a special purpose vehicle and the balance Rs 10,000 crore will be equity from the Centre. The low interest and the collateral benefits render the project almost free.
If out of the 508.17-km-long bullet train corridor, 155.76 km is to be in Maharashtra, 348.04 km to be in Gujarat and 4.3 km in Dadra and Nagar Haveli why then Maharashtra must share in equal with Gujarat is a point being raised? A proportionate expenditure or conversely extending the corridor to Pune would have been more apt apart from connecting another industrial corridor. Another contention is land acquisition along the corridor since most of it is running over ground. Even if the cost overshoots, a case exists for an underground duct, for many a project have fallen through for want of land acquisition. A case also should have been made for the futuristic Magnetic Levitation or Maglev technology where top speeds can be as high as 650 Km/hr. instead of the “Shinkansen” technology, capable of reaching speeds of 320 km/hr. Compared to over 400 deaths on roads to accidents, each day, the Shinkansen's 50 plus year history, carrying over 5.3 billion passengers, on almost 3000 km of rail line, not a single passenger death or injury due to train accidents has been reported. Many countries have developed high-speed rail to connect major cities, including Belgium, China, Denmark, France, Germany, Italy and Japan among many others. Even Morocco and Uzbekistan have them. India vying for a space among the best is still to start.
When the high speed network in future covers all the major metropolitan cities, the costs would come down. Who wouldn’t agree, that it makes sense to spend a bit more than one-third of our existing yearly transportation commitment to permanently retire a substantial portion of our unsustainable air and road traffic? The move must be to survive the challenges ahead, and deliver more economic benefits than costs. Public utilities are built not with an eye on the income - expenditure statement, but with the collateral benefits such systems offer.
Though the Japanese were the first in 1964 to operationalise, US, the most technologically advanced Country, does not have a high speed rail network till date. Lower population density of the cities making it financially unviable, stronger property rights making land acquisition difficult, the car culture, a vehicle market worth $35 billion per year, the difficulty of shifting to public transit since the massive infrastructure already built for planned cities would wither, the greater distance between many cities which could be connected more conveniently by commercial airlines and of course political interferences have been the reasons. It is interesting to note many of the reasons are equally true for our country as well. This bullet however must not bite the dust.
