Most of those who never tire of praising China’s infrastructure and its massive rollout, including 22,000 km of a bullet train network, but feel it is too expensive for India will do well to keep in mind China first started planning bullet trains when its income levels were far below what India’s are today. Even if you ignore the fact that China first started planning bullet trains in the 1990s and just look at the date when construction first began – December 1, 2003 – of the 2,078-km Shanghai-Wuhan-Chengdu line, China’s per capita income was under $1,300; today, when India starts construction of the Ahmedabad-Mumbai stretch, its per capita income is over $1,800. The other objection, that looks more relevant now with the recent spate of accidents, is that the Rs 1 lakh crore that the first stretch will cost is better spent on upgrading Railway safety, from new tracks to new coaches; indeed, since more people use the normal Railway network, there is more social good by doing so; linked to this is the issue of the high costs of running the bullet train network and whether it will ever break-even.
Both questions are incorrect, designed to give you a certain kind of answer. For one, the Japanese soft loan of around Rs 90,000 crore is not available for upgrading the current network – so the choice is to take the loan and build the bullet train or to not take it and do nothing. The Japanese government has given other soft loans, such as for the western Dedicated Freight Corridor, but don’t assume one loan can be used for another purpose. A 0.1% interest with a 15-year moratorium makes it very cheap and though costs rise to 3-5% once you include the cost of hedging the currency risk, it is still quite cheap.
Though the Jaica feasibility report had indicated the project would be viable at 1.5-2 times the current 2AC fares, this was based on a traffic volume that looks really high, at least right now. But keep in mind that almost no big infrastructure projects are viable on the basis of just the fares. When it was conceived, Delhi’s Metro was very expensive, especially in relation to the bus network, but it has changed the face of Delhi – and if it is one of the few in the world that is profitable, this is because the Metro was given lots of free land to monetize by way of buildings/advertisements; the same will have to be done for all bullet trains.
But imagine the change it will bring – people will be able to live in Ahmedabad or Surat or Vadodra or somewhere along the route and commute to/from Mumbai every day. The increase in convenience, the rise in land prices away from big cities and reduced congestion in big cities is the payback that the bullet train has to be measured against – a lower carbon footprint as more renewables are used to power it is another externality.
As in the case of the Delhi metro, the greater the length of the bullet-train network, the higher the economics of scale. Given how the bulk of value-addition takes place in urban areas, and how India’s urban population is growing, connecting cities well is critical to a country’s growth. More aeroplanes between Ahmedabad and Mumbai, in this instance, are certainly a substitute for the bullet trains to transport people, but that’s not costless as critics of the bullet train assume. Apart from the strategic lift to Indo-Japanese ties, Thursday’s foundation-stone-laying – by prime ministers Modi and Abe – is a big step forward in India’s urban journey.