Its critics are posing the wrong question
But surely the Rs 1 lakh crore for the bullet train from Mumbai to Ahmedabad, its critics ask, is better spent on upgrading railway tracks or even building a brand-new freight corridor that will take the load of the existing network? Put that way, the answer is obvious, given the number of people that will benefit from the existing rail network getting upgraded. But the question is a false one. Japan is not giving a R1 lakh crore loan—on terms that are virtually free—for a general upgrading of the railways network, it is being given for the bullet train only. India needs to figure out whether this is a gift horse or a Trojan one.
Given the 20-year moratorium, which may be extended under negotiation, and the 0.1% interest, the money is free but for the currency fluctuation and the cost to hedge—or the long-term view of the rupee versus the yen. Over a 10-year period, the yen has appreciated from 38 paise to the yen on January 1, 2006 to 54 paise today—over a 3-year period, it has depreciated, from 69 paise on January 3, 2012. Effectively, the cost of the project is the cost of the hedge. The government of India, which will guarantee the loan, will have to do the maths.
But keep in mind the project will not be viable despite the cheap money, just as no metro—or big highway project, for that matter—is the world over; that is why, in the case of the Delhi Metro, very large tracts of land in the capital have been handed over for free so that the metro can monetise them to cover operational costs. The payback for all such projects is the social benefit—in this case, the ability of citizens to complete a 7-hour train journey in 2, and while this can be done in less time by air even today, any airport travel involves waiting for at least 60-90 minutes at the airport; what this will do for inter-city travel and property costs over a few decades also needs to be evaluated, as citizens working in a Mumbai could well be living in a much cheaper Ahmedabad. Add to this the expertise the country gains in being able to execute projects of a certain type—it was only after the Delhi Metro was built that India got the confidence to undertake similar exercises in various other cities. It is possible, even after all this, that the bullet train equation will be found wanting. That is fine, but don’t condemn the bullet train by posing the wrong question.