A vanity project or a necessity?

There’s a video clipping of a speech Prime Minister Narendra Modi made a few years ago, when he was still chief minister of Gujarat, floating around on social media these days. In the speech, he refers to a conversation he had with then prime minister Manmohan Singh. “I told him,” Modi begins “we have to do some things just for show. After all, China also showcases only Shanghai, not the rest of China…You please launch the Mumbai-Ahmedabad High Speed Rail (MAHSR) project.”

Then the masterful speaker asks himself and his audience a rhetorical question. “What will that do for us (India),” and proceeds to answer it. “The world will come to know of our strength…It doesn’t matter how many people sit in the train and travel…it will show the world, we are no less than anyone. I told him, we have to do some things just for that.”

Cut to September 14, 2017. Laying the foundation stone for the MAHSR project, with his Japanese counterpart Shinzo Abe by his side, Modi said, “This enterprise will launch a revolution in Indian railways. It will speed up India’s journey into the future. It will become an engine of economic transformation in India.”

As Modi prepares to borrow on behalf of India Rs 88,000 crore from Japan to build MAHSR, it’s perhaps time to ask: which of the motivations is actually driving the project – to show the world “hum bhi kisise kum nahin” or to “speed up India’s journey into the future”? For how the project is designed and run and whether it will become an engine of economic transformation or beggar India in the long run will depend on the intent behind it.

Some details surrounding the project do not give one much confidence. Consider these:

Built high above India’s chaos: Japan went high-speed simultaneously with the nation’s rail system changing over from the old Metre gauge rail system, replacing it with Standard gauge. Thus, it built its Shinkansen system as a dense, ground-level rail network that ran out of existing stations with multiple tracks. That made high-speed travel the way of life, not an exceptional mode of travel, and therefore economically viable as Japan quickly obtained the high passenger traffic that the bullet train system needed.

India, on the other hand, is not building a dense network with multiple lines of HSR. Indian Railways is on Broad gauge and it’s not feasible to build a network starting from its existing rail stations and running on existing track. Further, to avoid the problems associated with land acquisition, MAHSR is being built on a mostly elevated track, 18 metres above the ground. Essentially, what’s being created is an island of high-speed rail, with a maximum of one or two lines. Therefore, bullet trains in India will always be an exceptional mode of travel, not a way of life for the ordinary masses, like Indian Railways is.

The promoters of the system are themselves going with the assumption that 1.6 lakh people will travel every day by bullet train by 2050. Indian Railways, in contrast, carries the equivalent of the entire population of Australia – 24 million people -- every day. And, it can be upgraded to 200 kmph all-through for the same cost as five lines of bullet trains in the ‘Diamond Quadrilateral’.

Bullet for our children: The more worrying aspect is the repayment of the project loan. True, Japan has offered a low-cost loan at 0.1% interest and a 50-year repayment period. But we are still talking about a huge amount of money. Firstly, what will be the cost overrun by the time the project is completed?

There have been multiple feasibility studies for the project. In 2006, the estimated cost was Rs 20,352 crore, but the UPA government did not move ahead on the project even at that cost because the rate of return was estimated to be too low. In December 2012, it was estimated that a HSR line from Pune to Ahmedabad (650 km) would cost Rs 49,076 crore. Less than a year ago, in last December, the project was pegged at Rs 98,000 crore. By the time it came to laying the foundation stone, it had risen to Rs 1.08 lakh crore – Rs 10,000 crore more in 10 months! So, what will the final cost be when it is completed?

Secondly, while the interest rate on the loan is nominally 0.1%, economists say that India will actually end up paying not just Rs 88,000 crore plus 0.1% interest over 50 years, but far more. The reason is that the Yen is expected to appreciate against the Rupee over the coming years. Thus, it is likely that India will end up paying nearly double the Rs 88,000 crore it borrows. For this one high-speed line. And it is our children and grand-children who will have to pay.

But if the intention is only to give the world our “taqat ka andaza” (a show of our strength), who cares about the costs? Vanity is priceless.