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Bullet train project to cost Rs 1 lakh cr

In its latest interim report submitted last week, Japan has factored in the cost escalation through the years that it will take to finish the project.

Written by Avishek G Dastidar | New Delhi | Published: April 13, 2015 2:38 am
Bullet train The train will connect Mumbai and Ahmedabad.

India will have to spend approximately Rs 1 lakh crore for its first bullet train corridor between Mumbai and Ahmedabad, preparatory work for which has gained speed.

In its latest interim report submitted last week, Japan has factored in the cost escalation through the years that it will take to finish the project. The amount, around Rs 98,000 crore, could rise a bit more.

Based on estimates from the Japanese team working on the feasibility study for the proposed 550-km corridor, Railways has circulated a 21-page inter-ministerial concept note detailing the way it intends to go about  implementing the project.

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From an earlier estimate of around Rs 62,000 crore, the concept note’s figures seem to have jumped to Rs 70,000 crore at 2014 prices. The interim report estimates 40,000 people will use the corridor daily by 2023. After the commissioning of the works, it will take around eight years for the first bullet train to hit the tracks.

The project estimate got a reality check after Finance Ministry, in its response to the concept note, highlighted that the estimate of Rs 70,000 crore did not factor in cost escalation and tax to be paid to the government.

The Ministry has now asked Railways for a copy of Japan’s interim report to study it further. Railways, in turn, has asked the Japanese team to give detailed estimates based on multiple technological options available to see if using any particular technology would lead to a significant variation in prices. The final report is expected in June.

The note says “discussions indicate” Japan International Cooperation Agency might agree to fund 85 per cent of the project in which construction and procurement cost alone is around Rs 49,504 crore. Other major expenditure heads are Consulting Service Cost (Rs 2,190 crore); land acquisition (Rs 10,248 crore); a contingency fund (Rs 3,334 crore) and the implementing agency’s management fee (Rs 4,700 crore).

The project may also bleed India’s coffers as its rate of return is projected to be only around 3-4 per cent. Railways considers a project economically viable if it has a rate of return of at least 14 per cent. But Railways said the bullet train’s “economic rate of return”—its contribution to the economy by the virtue of saving manhours and connecting two major cities—would be upwards of 11 per cent.

The concept note is a precursor to handing over the the job of the project’s implementation to Rail Vikas Nigam Limited (RVNL) and its subsidiary, High Speed Rail Corporation (HSRC). Railways has argued that the job be given to RVNL as opposed to creating a new entity for this project.

The Cabinet will decide if the job can be given to RVNL on a nomination basis; a cabinet note will be moved after evaluating response from other ministries. RVNL would require a fresh mandate from the Cabinet since its original mandate was to take up “viable and bankable” projects along the Golden Quadrilateral.

A section of the ministry has also been in favour of assessing multiple available options before zeroing in on an agency. An earlier Rail budget had said a High Speed Rail Authority would be created for this. Another Rail PSU, IRCON had last year sent a letter to Railway Ministry seeking to be considered for the job. The HSRC’s formation did not have the vetting of the Railway Ministry’s Finance directorate, but sources said Railways has internally resolved that issue.

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  1. I
    Apr 14, 2015 at 9:25 am
    There is more to life than increasing its speed - MK hi Prioritize please
    1. A
      Apr 14, 2015 at 9:00 am
      Development is a continuous process having place for all type of public like poor and rich.it should not be a prestige issue just to honor specific people or religion.priority need to be decided based on economic growth. govt decision is seem to biased as Indian youth immediate need is creation job, control over corruption,lot of anomalies in society,poor law and order situation society is divided in cast based politics as vote bank,education system which is future of India is demolished, every child is not so lucky to bear tuition and educational expenditure, heavy leakage in govt revenue inspite of tax burden increased,govt unusual expenses has crossed the entire limit limit,govt entire relief program to public failed and having hanged in corruption. govt must think otherwise day is near when every thing loss, govt can not be run longer on FDI funding...Govt should think once
      1. S
        Apr 13, 2015 at 10:47 am
        Bullet for whom ? Ahmedabad Mumbai sector is full of important stations. Ahmedabad - > Anand (milk capital ofindia) -> Baroda (Cultural capital of Gujarat) -> Ankleshwar & Bharuch (Chemical Hub) -> Surat (Diamond city) -> Vapi - > Mumbai. Any fast train between Ahmedabad and Mumbai need to stop at all this stations as all businessmen in gujarat will you. Previosuly also direct Trains were started between Ahmedabad Mumbai and Baroda Mumbai but after some times, they had to be stopped on Above stations thus killing speed. This because of por demand. Better solution will be tohave one dedicated third track between Ahmedabad to Borivalli (Mumbai) and run Fast trains in like Metro halting on this stations to make travel easier for Business cl.
        1. G
          Apr 13, 2015 at 12:45 pm
          what would be the ticket price to recover the project costs again?
          1. B
            BINOY SHAH
            Oct 17, 2015 at 3:08 pm
            JAI HIND SIR, 1 lakh crore for bullet train is too much,poor people r crying for water n food,basic essentials r not not available to large number of iINDIANS,sir,you sud spend those amount for infrastructure,water treatment,irrigation,existing railway system sud improve tremendously.sir,please rethink about it..its not basic amenity.please sir, i m resquesting you for better INDIA..hope 4 the best..
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