India’s ambitious bullet train or High Speed Rail (HSR) project will now take-off after laying the foundation stone for the 508 km long Mumbai-Ahmedabad High Speed Rail (MAHSR) project. This is being seen as the emergence of a new era in Indian Railways as global transportation technology makes inroads into the country. Transition from colonial-era technologies and practices in past four or five decades to high speed technology is being hailed by many sections of the society. However, such transition would require huge amount of investments. MAHSR project alone would need approximately 1.1 lakh crore of investment during 2017-22 period. Critics may argue the need for such investments considering more pressing areas and sectors in the country that require significant attention of the government.
Indians are travelling longer and travelling more than ever before, thereby inducing demands for safe, fast, reliable and comfortable transport system. The bullet train system is designed to be faster than a car, while also cheaper and more convenient than a plane. Trains can attain average operating speeds of around 250 km/h in a bullet train system. One unique advantage of the bullet train system is that it would help bring settlements 500-600 km apart within two hours of each other. This will stimulate trade and boost economic activities between satellite towns. It is generally considered that the bullet train or HSR system would be able to meet its objectives on 250-800 km routes. Airlines are more economical and time saving when distance is above 800 km whereas road transport is more economical when distance is less than 250 km.
HSR also offers advantage in terms of savings in land cost. As per an industry estimate, a double-track rail line has more than thrice the passenger carrying capacity of a six-lane highway while requiring less than half the land. Furthermore, alignment of HSR line along existing rail / road corridor should be explored first as it would reduce government efforts and expenditures on land acquisition and rehabilitation activities. Besides, it can significantly contribute to development of efficient multi-modal transport system in the country. In Australia, two broad corridor alignment options were evaluated for the Melbourne-Canberra HSR line – both of them along existing corridor. A multi-modal transport system in which passengers prefer road, rail and airplane for short (less than 200-250 km), medium (about 250-800 km), and long (above 800 km) distance travel respectively would be an ideal situation in a country like India.
One major advantage of the MAHSR project is that it would be largely funded by cheap loan from Japan International Cooperation Agency (JICA). Japan has offered to provide soft loans of approximately 81% of the project cost at a concessional rate of 0.1% per annum, with a repayment period of 50 years. It is understood that Japan’s offer is not transferable to other rail projects. In view of lack of private investment in infrastructure sector, India cannot afford to miss the opportunity to access large amount of finance at almost zero cost considering the infrastructure deficit in the country.
Low financing cost would also enhance project’s viability, meanwhile, the government should also explore various fare and non-fare revenue generation sources to ensure operational sustainability. Fare determination mechanism should be based on parameters such as capital and operations costs, fares in alternate modes of transportation, affordability etc. Fares in HSR system must be higher than the fares in normal rail system in the country. As for example, HSR fares in China are around thrice the conventional train fares. Land monetization in terms of development of hotels, retails, office spaces etc. should be part of the HSR project planning process. Other source of non-fare revenue could be advertisements.
The bullet train system integrated with modern equipment and technology is one of the safest and most reliable mode of transportation. Shinkansen in Japan and TGV in France are perfect examples of how safe these systems are. This becomes crucial in current scenario where quite a few train accidents have happened in India during last couple of years.
Further, HSR system is an environment friendly system that contributes to emission reduction due to diverted road traffic and reduced congestion on existing roads. As per an estimate, a high-speed electric train emits an eight and a fifth of carbon dioxide as against automobiles and airplanes per passenger km, respectively.
Last but not the least, Indian economy has been witnessing low growth over the last couple of years. Lack of new job opportunities in the market is hampering the growth of country’s youth population. Government’s push towards infrastructure seems to be a reliable solution to address the economic conditions. It is expected that the MAHSR project would enable creation of around 15 lakh jobs in the market.
(By Abhaya Agarwal, Partner – Infrastructure and PPP at EY India and Azizul Quadir, Associate Vice President at EY India. Views expressed are personal)