The government of India recently decided to build a high-speed rail (HSR) corridor between Mumbai and Ahmedabad at a cost of Rs 97,636 crore with Japanese financial and technical assistance. The Japanese assistance proposal had certain merits. First, the negotiated terms — the rate of interest of 0.1 per cent per annum and tenure of 50 years with 15 years grace — is the best till now for any project financed through a bilateral/ multilateral agency in India. Second, the assistance programme involves transfer of technology and a Make in India component, which will have long-term benefits for Indian manufacturing. Third, there is no minimum Japanese procurement restriction in percentage terms as in the earlier Step (Special Terms of Economic Partnership) loan, where 30 per cent of the total price of contracts needed to be procured from Japan. Fourth, all the main construction packages will be open to Indian companies, which was not the case in earlier Step-funded projects. Also, since the Japanese concessional funding is available only for this specific HSR project, it makes sense to pump in funds in the economy, which is looking forward to such big investments in times of a global slump.
Constructing HSR lines in the country should be seen as a nation-building exercise rather than a standalone project justified only on transport demand.
India has the fourth-largest rail network in the world. Considering the size, scale of operations and technology, it is appropriate that the railways builds its first HSR line to move forward on the technology learning curve.
A growing economy like India needs investment in infrastructure and railways, which has a multiplier effect. The Indian Railways is not constrained by demand but by capacity, and any substantial investment in railways will enable economic growth. The HSR will enhance transport capacity by four to five times of the normal capacity and facilitate the movement of a large number of people. Train passenger volume between Wuhan and Guangzhou in China rose by 40 per cent after the construction of the HSR. Similarly, passenger volume between Beijing-Tianjin increased by 86 per cent within one year of the operation of the HSR. The high cost of the project is offset by much higher utilisation rates of the network and rolling stock per km than conventional rail.
Before the implementation of metro and dedicated freight corridor projects, Indian construction companies were hardly exposed to big-ticket infrastructure projects, making them uncompetitive at the global level in terms of technology. China, through the implementation of HSR projects, improved construction technologies and equipment and introduced innovations in information technology and electronics. It registered nearly 1,000 technology patents. Almost 1,00,000 components of the HSR are produced by 100 core enterprises and 500 related enterprises in China, providing a thrust to hi-tech research, development and manufacturing. Similarly, the building of HSR lines in France and Japan led to the emergence of large firms like Alstom and Hitachi.
Development of rail-based transportation in India has reduced road congestion and pollution, provided convenient transport solutions, enhanced benefits to
real estate and the service sector and facilitated balanced urbanisation. The Beijing-Tianjin HSR line helped the growth of realty and commercial industry in Tianjin. New economic centres have emerged around new stations along the HSR line. The Wuhan-Guangzhou HSR line has facilitated the economic and cultural integration of three provinces. The HSRs have enabled balanced distribution of resources, besides the development of new economic centres. HSR projects ensure better land usage and energy efficiency. The implementation of high-speed trains in Europe led to a substantial shift from road and air to such systems. Although, the opening of HSR lines led to the closure of a number of airline services (Paris-Lyon and Madrid-Seville), it can also complement major airline hubs. Airports like Amsterdam, Frankfurt and Paris have HSR lines complementing the infrastructure. In India, consumers from Vadodara, Surat and Ahmedabad will have better access to the Mumbai airport as journey time reduces to nearly two hours.
Since the HSR system is highly safe, they reduce external costs (accidents, air/ noise pollution, impact on climate, etc). There has been no casualty due to accidents on Japanese high-speed trains since they started in 1964. Transfer of traffic to such systems from airlines and highways leads to less external costs. According to the figures of the International Union of Railways (UIC), while the external cost of trains is 15 euros per 1,000 pkm (passenger kilometre) it is 57 euros for airlines and 64 euros for cars. Past experience shows that demand is not a constraint in India: Creation of supply in the present case will create demand. Also, a healthy economic rate of return of almost 12 per cent, accounting for only the direct benefits and the other socio-economic benefits mentioned above, is sufficient to look beyond conventional speeds and move towards high speed.