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Friday, April 16, 2021

Shooting in the dark

The Bullet Train project is economically unviable, will not lead to a transfer of technology and serve only a minuscule proportion of rail passengers.

Written by Anil Dharker |
Updated: September 23, 2017 12:10:26 am
bullet train, bullet train india, shinkansen, bullet train japan, bullet train ahmedabad mumbai, japan, india, indian express news C R Sasikumar

Is the Bullet Train a white elephant or will it leap-frog India into a new era of advanced technology? If you consider the question rationally, there is only one possible answer.

Japan introduced its high-speed Shinkansen line between Tokyo and Osaka as long ago as 1964. Its top speed then was 210 km/hr; it’s now 350 km/hr. Since the first Bullet Train made its debut, 10 other countries have developed a high-speed network, the biggest being China’s (89 tracks covering 26,783 km against Japan’s 17 tracks covering 3,041 km). Other countries with high-speed trains include France, Germany, Italy, Spain, South Korea and even Turkey. None of them uses the Shinkansen system — so is Japanese technology really the best? There seems to have been no technical evaluation comparing other available systems, so are we embarking on a project of over Rs one lakh crore on blind faith?

But even assuming that the Shinkansen system is comparable to any other technology on offer, how does it help Indian engineering to take a big leap forward as has been claimed by government sources? There is an interesting comparison here. It is said that some years ago, Japan offered to build the high-speed network for China. After much negotiation, the talks stalled on one point: The refusal of the Japanese to transfer technology, as is generally done in large-scale projects after an agreed period.

Maharashtra Chief Minister Devendra Fadanavis’s statement the other day is significant: “Where will the raw materials and labourers for the project come from? Obviously from India! Everything that needs to be used in the project, right from services to provisions, will have a great potential of creating revenue.” There is more of this in the same vein from other politicians. Note, there is no mention anywhere of transfer of technology — and so far, none from any government source. Is that because the Japanese have said they will guarantee safety only if they build the complete system? Presumably, this condition will also apply to bullet train projects which are proposed to connect major metros in the future. So how exactly are we taking a technology jump upward?

If there was no technical evaluation and no transfer of technology agreement, was there at least a viability report? Apparently, yes. What are the details? No one knows because officialdom has refused to share the report even in response to RTI applications. We, however, do have the example of Taiwan which installed the Japanese Shinkansen system. In the early 1990s, a consortium of private companies was formed to install a high-speed train system on a Build, Operate and Transfer (BOT) model. The system became operational in 2007 with an investment of $14.3 billion. By 2014, the rail operator was bankrupt with cumulative losses of $1.5 billion. Because a rail network is for the public good, the Taiwanese government bailed out the consortium by injecting $1 billion of public money and reduced the operator’s share by 60 per cent. In India, the BOT model was not even floated as a trial balloon for the very good reason that no private company would have bid for the project — the failure of the much less capital-intensive Metro project (BOT) is very much on everyone’s mind.

The BJP government in Delhi has embraced (and claimed as its own) many of the UPA government’s ideas like GST. So it’s worthwhile to know that the UPA government had rejected the Bullet Train project as being completely unviable. In fact, the then Finance Secretary Rakesh Mohan had said that he would not approve the project even if Japan gave a grant instead of a loan. That’s probably because projections show that the Mumbai-Ahmedabad train service will need to carry nearly one lakh passengers a day to keep fares at a reasonable level. The current traffic is only about 18,000 per day, which means that either fares will have to be raised well above air fares, or that the system will have to be subsidised in perpetuity.

Much has been made of Japan’s loan being “virtually interest-free”. The Japanese are giving a 50-year loan of Rs 88,000 crore of the total project cost of Rs 1,10,000 crore, the rest coming from the central government and state governments of Gujarat and Maharashtra. If the interest rate offered to India of 0.10 per cent sounds benign, consider this: The interest rate on 10-year Japanese government bonds is 0.04 per cent and other interest rates can even be negative. That should put Japanese benevolence in its place.

The difference in interest rates between India and Japan (our 10-year government bonds yield 6.5 per cent), has another, serious and long-term implication. According to a financial analyst, if we consider average Indian inflation at three per cent, and Japanese at zero per cent, the rupee will depreciate three per cent every year vis-a-vis the Japanese yen. So over 50 years, the sum to be repaid will not be Rs 88,000 crore but could be well over twice that amount. In short, the Bullet Train is a bullet to the head of our future generations.

And apart from fulfilling the prime minister’s dream, what other pressing objective does the Bullet Train project serve? According to Bibek Debroy, who is a railway expert and a member of NITI Aayog (so not in any anti-government camp), 95 per cent of rail users in India do not use even the Rajdhani or Shatabdi trains. So only five per cent of Indians use our present super-fast trains because they find the extra fares beyond them. In short, bullet trains are going to make travel faster for five per cent of the population, which already has the option of air travel.

Let’s look at the big picture. The Bullet Train project is going to cost Rs 1,10,000 crore; in last year’s rail budget, the total outlay for the entire Indian railway system was Rs 1,21,000 crore. The Bullet Train will serve a small percentage of people travelling between two cities; the Indian railway system, with over 13,000 trains running every day, carries more than eight billion passengers per year plus 1,000 million tonnes of freight over the whole country. The cost for the two, as the figures show, is virtually the same.

So take your pick. What does India really need? A big bang bullet for the few, or a large, improved, safer system for all? You really think that question needs an answer?

Dharker is a writer and columnist

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