Biting the wrong bullet
On December 11, India agreed to buy the Shinkansen high-speed bullet train from Japan to link Ahmedabad and Mumbai. The Indian Cabinet swiftly cleared the $14.7 billion (£9.6 billion) cost of building the 650-km long bullet train system. Prime Minister Narendra Modi said, “This enterprise will launch a revolution in Indian Railways and speed up India’s journey into the future. It will become an engine of economic transformation in India.” But will it? To be sure the Bharatiya Janata Party, in its election manifesto released on April 7, 2014, very specifically said that if elected, the BJP government will launch “a diamond quadrilateral project of high-speed train network (bullet train)”. This quadrilateral, also known as the golden quadrilateral linking the four big metropolises, envisages a network of 5,846 km. It joins Delhi, Chennai, Kolkata and Mumbai or North, South, East and West. But it doesn’t include Gujarat’s capital, Ahmedabad.
Indian Railways is the third largest railway network in the world with 7,083 railway stations, 1,31,205 railway bridges, 9,000 locomotives, 51,030 passenger coaches, 2,19,931 freight cars and 63,974 route km. Today, the Indian Railways operates 19,000 trains each day, comprising 12,000 passenger trains and 7,000 freight trains. It transports 2.65 million tonne of freight traffic and 23 million passengers every day and 7.2 billion passengers per year. It currently has 1.36 million employees and an annual revenue base of about Rs 120, 000 crore ($20 billion). The railways have come a long way since the first passenger train service began on April 16, 1853, when 14 railway carriages carrying about 400 guests left Bori Bunder (Mumbai) at 3.30 pm “amidst the loud applause of a vast multitude and to the salute of 21 guns”.
More than anything, the Indian Railways typifies the vast, creaking and dilapidated nature of India’s infrastructure, primarily because the Indian Railways hardly earns enough to pay for itself, let alone invest in modernisation and safety. The Indian Railways is cash strapped mainly due to the recurring losses in the passenger segment of its operations. Last year, it lost Rs 30,000 crore ($5 billion). The loss per passenger-km increased to Rs 0.23. After adjusting the income it derives from freight, the railways is left with a surplus cash of just Rs 690 crore ($115 million).
Its top managers have frequently red signalled the crisis. A top official said, “In the final analysis, the performance of the organisation would be just at the bottom line and unless we are in a position to control the expenditure and increase the earnings on a sustained basis, survival for the organisation becomes a very difficult proposition.” But the railways get by every year with huge dollops of government funding and, increasingly, by postponing vital investments. For instance, important decisions such as the filling of tens of thousands of safety-related posts such as gangmen, pointsmen, signalmen and assistant station masters keeps getting postponed.
Consequently, the burgeoning incidence of railways related accidents. Since 2000, there have been 89 major accidents and almost two-thirds of them since 2010. It is estimated that almost 15,000 people die while illegally trespassing railway tracks every year. Of these about 6,000 are on the Mumbai suburban section. According to home ministry records, 25,006 people died and 3,882 were injured in a total of 28,360 railway accidents across the country in 2014 alone. The challenge was clear for many years. In 2012, a high-level committee recognising that the condition of the tracks and bridges was a cause of concern because the weak tracks forced the trains to run slowly. The committee tasked the Indian Railways to:
Modernise 19,000 km of existing tracks comprising nearly 40 per cent of the total network and carrying about 80 per cent of the traffic.
Eliminate level crossings and provide fencing alongside tracks. To eliminate level crossings by building rail over and under bridges.
Strengthen 11,250 bridges to sustain higher loads at higher speeds, noting that about a quarter of 131,000 bridges are over 100 years old.
Provide 100 per cent mechanised track maintenance on the main routes to provide for superior quality of track laying and maintenance.
But neither the Indian Railways nor the Indian government has so far been able to rustle up even a fraction of the Rs 800,000 crore ($130 billion) outlay required for all this. The question therefore must be: How does a bullet train joining Mumbai and Ahmedabad address any of these urgent needs? On the face of it the Japanese offer is very attractive. Japan has offered to meet 80 per cent of the Mumbai-Ahmedabad project cost, on condition that India buys 30 per cent of equipment, including the coaches and locomotives, from Japanese firms.
In the coming years, up to 70-80 per cent of these components could be manufactured in India. The Japanese government has offered technical support and is willing to drive the local manufacturing and technology transfer initiative within a specified period, according to sources. In addition, Japan has offered funding at 0.1 per cent, compared to the 0.3 per cent cap decided by India recently, with the tenure of the loan at 50 years, along with a 10-15 year moratorium. Of the total project cost, around '17,000-18,000 crore would be the cost of land.
These terms cannot be scoffed at. But questions will persist: Can this be the most competitive offer? Did the government even consider or invite other offers? How much are the Japanese going to make out of this? The purpose of competitive offers is to eliminate all these. But this due process was bypassed. Finally, the big question that will not go away is whether the same investment on upgrading the entire Indian Railway network would be more economically beneficial than a single high-cost project? India adds a million young people to its workforce every month. There is little disagreement that upgradation of the entire railway network would entail creation of many more new jobs than a single capital and import-intensive project. How does this tie in with Prime Minister Modi’s hope that “it will become an engine of economic transformation in India?”
The writer, a policy analyst studying economic and security issues, held senior positions in government and industry. He also specialises in the Chinese economy.
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