The critics of the bullet train project may not like the recent statement of the Prime Minister Narendra Modi advising those opposing the bullet train project to travel on bullock carts. However, they should realize that his emphasis on the necessity of the project for India is appreciated by the masses. In fact they should realize that continuous criticism of the project may boomerang on them as the people at large does not believe that the government, by committing to the bullet train project, has compromised on the upgradation of the Indian Railways.
Millions of businesses thrive and billions of people live, directly or indirectly on Indian Railways. Therefore, in addition to its financial objectives, it has to achieve a social goal and this is why it is, unlike many rail networks around the world, is controlled and run by the government. Naturally, any investment by the government on the Indian Railways is seen by the public as an act for the welfare of the people. But the politics and too much of bureaucracy has made, operationally, the whole network as one of the most inefficient railway network in the world. The consequence is not just longer travel time or loss of taxpayers’ money.
Travellers regularly meet with fatal accidents and also face innumerable incidences concerning their safety. Given the seventy of years of heritage of poor management during post-Independence era, the effort to improve both financial and operational performances of Indian Railways appears to be a Herculean task. Even if we assume that a complete organisational overhaul is possible, given the size, the financial requirement may reach few hundreds of billions of dollars. Finally, the taxpayers' would pay a major part of the above funds and also the interests on borrowings for something for which the outcome is unknown.
Given our competency in project management, they may have to spend more than a decade before we can see substantial difference in performance. As any economy is deeply linked to its transportation and communication infrastructure, until we do it (or rather complete the overhauling process) our economy must suffer.
The bullet train project is about trying an alternative approach which is easier in terms of effort and project management but may have similar financial burden. The investment, however, would build an alternative high-speed network that uses latest of the technological advancements and is safer. The alternative being completely new makes it easier to manage and execute.
More strategically, we can use the new network for long-distance travel while utilising the existing one for short-distances. Please look around and analyse some of the major technological innovations where governments as well as private enterprises are putting hundreds of billions of dollars. A good number of such big technological developments relates to the transportation sector. No one has any doubt that these efforts are going to drastically change the way businesses would be conducted in the future.
In such a scenario, the Indian Railway, with an average speed of just above 50KM/hour looks medieval and would definitely hamper our economy at a time we are aiming to become world’s third largest economy after the USA and China.
The critics argue that the bullet train project is not financially viable and is a wastage of taxpayer’s money. The prime minister, on the other hand, argued that the project is coming very cheap. Please note that the repayment of the loan will start only after 15 years with an annual repayment of lesser than Rs 3,000 crores. For India of 2035, it is indeed an insignificant amount. The critics argue that the project would be viable only if a volume of 100,000 passengers per day is achieved and this is impossible to achieve. The argument is also that the airfare between Mumbai and Ahmedabad is cheaper than the targeted one-way fare. The fallacy in the above arguments is that the volume requirement becomes relevant only after 15 years when the repayment of the loan starts.
Given the conservative estimate of 20,000 passengers per day in 2020, any scientific estimation method would give closer value to the desired number for the traffic volume in 2035. I also did a quick check on the prices for one-week advance air ticket and found that the least airfare is at least 40 percent more compared to the proposed train fare. The biggest benefit though would be travel speed and convenience. A businessman or an entrepreneur or someone from the working class would only see an economic opportunity in saving time and improving convenience. Thus, keeping in mind about the India of the future, building a pan-India network of bullet trains would definitely be a rational investment decision for the government.
(The writer is Associate Professor, Indian Institute of Management, Kozhikode)
Published Date: Feb 24, 2018 10:33 AM | Updated Date: Feb 24, 2018 10:40 AM