By Nirmal Ghorawat
The Diamond Quadrilateral is an ambitious project to connect the four metropolitan cities of India, viz. Delhi, Mumbai, Chennai, and Kolkata with a high-speed railway. India can afford multiple bullet train projects. The financial terms offered by Japan include soft loan and a long tenure of repayment with an initial gestation period. The Indian Railways (IR) Medium-Term Investment plan for the period 2015-19 as per Railway Budget of 2015 is around Rs. 8,56,020 crores, and includes a provision for around Rs.65,000 crores for High-Speed Rail and Elevated Corridor.
Against all criticisms
Much criticism of High-Speed Rail is based on the belief that IR must spend on improving safety, security and expanding the existing infrastructure. This is not based on facts as IR would actually be investing substantially in regular railway infrastructure. Expenditure on High-speed Rail is only 7.59% of Indian Railways Capital Outlay for the period 2015-19. The proposed Mumbai-Ahmedabad bullet train will use only 30% from the outlay for High-Speed Rail, leaving scope for further projects. The expenditure on existing technology and systems will continue to be substantial. The High-Speed Rail Project will not substitute it in any way.
How viable is the project?
Much has been said and written about the financial viability of High-Speed Rail projects. However, the only quantitative research has been an IIM Ahmedabad study. The said paper takes into account two scenarios of 20% and 40% of ticket fares as operation & maintenance (variable) expenses. The rest are fixed costsinterest & loan repayment. The point it is missing while still stating in obvious terms is the high operating leverage the project will enjoy. It will have the opportunity to reduce fares without losing profits, but maximising it. Transportation projects generally, and highly capital intensive projects such as the bullet train, have high fixed costs vis-à-vis variable costs. If capacity/saleable units available is increased, fixed costs per unit will come down resulting in lower passenger fares, and higher demand and occupancy.
In 2015-16, the air traffic between Mumbai and Ahmedabad was ranked as the 5th busiest air route in India. Moreover, Indias air travel is growing at a CAGR 10%+, and the bullet train project is scheduled to commence only in 2022. Air travel, in the normal course, should have grown to double the 2015-16 base by then. Another highlight of the bullet train project missed by experts is the high capacity vis-à-vis regular railway. Because of high-speed, 3x on average, bullet train project should be able to demonstrate a capacity of 3x on twin tracks. This will be an equivalent of 6 regular speed tracks. Any evaluation of the capital cost of bullet trains must factor this aspect.
Brunt of fuel subsidies
The important question is not whether India should have bullet trains and metro transit systems. The real question that must be asked is how many it could have had if UPA 1 & 2 had not spent INR 8-10 lakh crores on fuel subsidies, i.e., producing carbon dioxide gassomething which the high carbon tax policy of the incumbent government is reversing.
In a rather contrarian opinion, the Government should consider earmarking a portion of the carbon tax on fuel so collected on modern public transport infrastructure such as metro railways, suburban railways, electric bus rapid transit systems (eBRTS), and high-speed (350 km/hr) and semi high-speed (160/hr) upgradation of Railway infrastructure. This can provide the Indian public with an alternative to oil imports. It will also benefit the Indian Current Account in a significant manner in the future.