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Mumbai-Ahmedabad bullet train will need to make 100 trips a day to be viable: IIM study

The train will have to ferry between 88,000 and 110,000 passengers every day to ensure that it repays the loans with interest on time

By: PTI | Ahmedabad | Published: April 18, 2016 10:10 am
Bullet train, mumbai-ahmedabad bulllet train, viability of bullet, bullet train project, bullet train in mumbai, bullet train in ahmedabad, bullet train in India, indian railways, india news The study states that the Mumbai-Ahmedabad route is a good choice as it connects populous cities with high growth. Representational image.

The proposed bullet train between Mumbai and Ahmedabad will have to ferry 88,000-118,000 passengers per day, or undertake 100 trips daily, for the Railways to keep it financially viable, according to a report by Indian Institute of Management Ahmedabad (IIM-A).

The report, titled, “Dedicated High Speed Railway (HSR) Networks in India: Issues in Development,” states that if the Railways set the ticket price at Rs 1500 for 300 km drive per person fifteen years after the operation, it will have to ferry between 88,000 and 110,000 passengers every day to ensure that it repays the loans with interest on time.

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Japan has offered a concessional loan of Rs 97,636 crore to fund about 80 per cent of the project cost with a repayment period of 50 years beginning from the 16th year of operation at an interest rate of 0.1 per cent.

For the remaining 20 per cent loan, the authors assume 8 per cent average rate of interest (on Rs 20,000 crore to be funded by the Centre). Japan has offered a 15-year moratorium on loan, so revenue concerns for the Indian Railways will arise from the 16th year, the authors state in the paper.

The total distance covered by the train will be 534 kilometres.

The paper has been jointly authored by faculty members G Raghuram, professor of the institute’s Public Systems Group, and Prashanth Udayakumar.

Fifteen years after the bullet train becomes operational, while the actual operating cost is not known, the paper assumes two scenarios by pegging operating cost at 20 per cent and 40 per cent of revenue.

“So if the Railways earn Rs 100 revenue, Rs 20 or Rs 40 will go for maintenance, and remaining surplus money will go for cash payment of loan with interest. Now, to cover the loan with operating cost in two scenarios, we consider passengers travelling an average 300 kilometres. In this case, we will need 88,000-118,000 passengers respectively for both the scenarios,” Raghuram said.

“Typically one train carries 800 passengers, so to carry 88,000 passengers daily, you will need to take a total 100 trips, or 50 trips each way. So, we need three trains every hour in each direction,” he said.

As per the paper, “there are many positive benefits and externalities of the HSR which would be useful in India’s overall aspirational development.”

“These externalities include technology percolation into other domains, economic development, game-changing sense of connectivity, and national pride due to cutting-edge infrastructure.

“In such a context, it is a good idea to begin and learn,” the paper states as it draws on experiences of running HSR in countries such as Japan, China, Spain, France, Russia, among other countries.

“The Mumbai-Ahmedabad route is a good choice for the first route, since it connects India’s first and seventh most populous cities, with significant economic development in the 500-km corridor between them. Also, the low cost Japanese financing has been a great catalyst.”

In terms of future network growth, this segment can be part of extension to Jaipur and Delhi, it states.

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  1. M
    Nov 22, 2017 at 11:59 pm
    IIM(A) must also do a study on the present railway track( on which we all move) and costs involved , it takes approximately 60 years to return the money invested(ROI,pay back) ,it looks like even IIMA like ins ute got political, very embarrassed,shame on u all ,Ins ute like ur must find a economic solutions,present If our situation ( Indian) is such a bad shape how did the countries who got such trains managing ,how is their shape --capex ,opex ,ROI, PAy back ? without a "comparative study" how did a ins ute like ur conclude on such a initiative ?(you are not a by lane,town MBA college).that completeness is missing. doing a such a detailed study is appreciable but the learned must also put down the possible traffic and the gap .Brainstorm on how that can be filled ,who can possible be future traffic .can you do above ( brainstorm and find solutions) to prove your ins ute is not a politically inclined ? that track(MMb-Ahbd) was opted by all as most traveled(volume) track in
    1. H
      harsha d p
      Sep 18, 2017 at 2:15 pm
      What is the interest rate of the world bank??
      1. logiccool
        Sep 16, 2017 at 12:34 am
        IIM Ahmedabad's report quoted here also discussed the challenges to run Semi High Speed Trains like Gatiman Express( trains with speeds ranging from 160KM/H to 200 KM/H ) by improving the current infrastructure. Its said that Media is not highlighting those details in their articles and just raising concern about India's move toward Bullet Train
        1. Archana Das
          Apr 18, 2016 at 7:26 am
          It has national and social benefits, value them properly, it will be viable.
          1. G
            G. Sampath
            Apr 23, 2016 at 12:45 am
            This is apoor economic essment. The secondary benefits of such projects can be better understood by reading articles by the Nobel Laureate Paul Krugman.
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