Can India afford Bullet Trains?

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This is a question worth INR 1.1 lakh crore hence deserves an unbiased analysis with open minds . So lets analyse the stats and then put up the narrative rather than letting the pre-decided narrative influence the whole write-up .

After a little research over the internet I managed to gather below list of questions which needs to be answered :-

1)Can a nation of poor ,hungry , jobless ,homeless people afford a luxury of INR 1.1 lakh crore ?

A question decorated with heavy words representing the weakest in the society strikes the moral chord of one's conscience easily . But if we go by this logic then all the government bus services should stop till each corner of the nation has roads . All the trains should stop till each city of the country has a railway network . These are weak arguments with no substance . Undoubtedly nation building includes irradicating poverty ,providing homes ,generating jobs alongwith creating the world class infrastructure to remain in race against other developing nation but these all happens hand-in-hand and none waits for the other .

2)Shouldn't we put this amount to renovate the existing traditional railways ?

We must understand that the budget allocated for traditional railways would not be impacted at all . It is as good as arguing that we should not build IITs ,IIMs ,AIIMs and divert that amount for the betterment of railways . Though both the traditional and the bullet trains would fall under Railways ministry but they have nothing in common  right from budget ,tracks ,implementation to governing bodies .

80% percent of the amount will be funded by Japan while Indian Railways will have to create equity equivalent to left over 20% .

 

3)Why should whole of India pay for luxury of Gujarat and Mumbai ?

Re-iterating the already stated fact that - 80% percent of the amount will be funded by Japan while Indian Railways will have to create equity equivalent to left over 20% . This 20% will be borne by Gujarat and Maharashtra state governments .

4)Economics of Ahmedabad-Mumbai bullet train .

In total 35 services will be operated daily .

Each way it becomes = 35 * 2 = 70 trips daily .

Now each train will carry approx 1300 t0 1600 passengers

Total passengers daily = 70 * 1450 = 101500 (considering trains running on full capacity. Estimated cost of ticket = INR 3000/-

Revenue generated per day = 3000 * 101500 = 30,45,00,000(INR 30 crores approx.)

Revenue generated yearly = 30 * 365 = INR 10950 crores .

Considering profit to be 20% -> total profit yearly = INR 2000 crores

Around INR 19000 crores has to be borne by Railways . To recover this amount in first 15 years of non-payment of interests ,Railways need to generate INR 1266 crores yearly which is very much with in the reach .

After 15 years the principal amount to be paid would beapprox. INR 2000 crores yearly in addition to the interest (79 crores) . By the time 15 years passes the system ,processes , business models would be stabilised . Alongwith the main business model of generating revenue from tickets there would surely be earnings from other models such as advertisements ,vendors etc .

The calculations indicate that it is not going to be a flopshow . If handled professionally and remains corruption free then finances can be managed . In addition to the first train India would be getting the technology to manufacture its own Bullet train on other routes , which will cost less and will generate similar revenues hence creating a bigger margin for profit .

Note : While doing the calculations we have not considered multiple factors :-

a)Yen to INR depreciation or vice versa - taking into account the last 5 years of yen vs INR performance we notice that INR has deppreciated . Current conversion rate from INR to Yen  is 1.76 while five years back it was around 1.9 . Either ways this factor is hardly going to impact .

b)We have assumed ticket cost to be INR 3000 which is expected minimum . Ideally ticket might vary from INR 3000 to INR 5000 depending upon the kind of coaches being introduced .This factor goes in favour .

c)Trains running on full capacity - this factor can not be forecasted . Around 4 lakh people travel daily from Ahmedabad to Mumbai . One in four persons are required to travel in Bullet trains to run full on capacity . Bullet trains will divert a major chunk of air traffic as it is not only equally fast but also offers viability of getting into the train from multiple stations adding to the traffic   .

Hence India is prepared economically , technologically , logistically ,psychologically to witness its first bullet train to be functional from 2022 . The only negative factor which even China is facing would be that with the advent of Bullet trains traditional trains on that route would take a hit and slowly will have to be reduced which will force poor to take a bullet train and shell out more in case of an urgency .

 

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7 Comments

  • Richeek Mishra

    November 4, 2017

    Good analysis

    Reply
  • Rishabh

    November 4, 2017

    U are amezing man..

    Reply
  • Satyam Pathak

    November 4, 2017

    Even if there was a need for much faster transport then a country like India, which is facing poverty, corruption and should make space for aviation in place of the bullet train.

    Reply
    • Kinjalk

      November 6, 2017

      Satyam we must understand that aviation industry is not the solution of all problems and has its own limitations and that is why need of faster trains arise else trains would have completely stopped after the invention of Airplanes .

      Reply
  • Arzoo

    November 6, 2017

    Good Blog !!!

    I want to say that why Narendra Modi government has advertised the project as a symbol of new India that would significantly reduce travel time (from seven hours to about two hours) between Mumbai and Ahmadabad and spur economic growth in the region. But critics say it is difficult to justify a grandiose and expensive project like the bullet train at a time when the existing rail infrastructure in the country is creaking and train derailments, accidents have become a daily occurrence, instilling fear among passengers.

    First of all think about the existing rail infrastructure, invest here only rather than going forward

    Reply
    • Kinjalk

      November 6, 2017

      Hi Arzoo,
      Valid point and a very common question in the minds of most of us . I have stated this point while answering question 2 in my blog above . Since you have asked let me answer again -:

      1)First we must understand that the GOI is not cutting down any finances which the traditional railways deserve .
      2)Secondly the two major causes of derailment has been :-
      a)Manned Crossings – would be eliminated in an years time,
      b)Deffective tracks – new tracks to be brought up faster
      Piyush Goyal the new Railway Minister chaired a high level meeting addressing Railway authorities to consider security of the paramount importance .
      3)Please understand that Japan has agreed to loan 80% of the amount of the finances of the Bullet train project just because it sees opportunity to earn while on the other hand Japan wont find any opportunity to earn in already old and reeling tradition railways hence would not agree to invest in it .
      Having said that we must understand that there is no stone unturned whether financially ,logistically , strategically in getting back the traditional railways in proper shape .
      4)Last but not the least , we are already 10 years behind China in terms of Bullet Trains . If we do not invest in infrastructure on time we would not be able to compete China in getting more investments and making India a global manufacturing hub .
      The better the infrastructure higher the investment .

      Reply
  • Saurabh

    November 15, 2017

    Great Analysis with so much valid and logical data…

    Reply

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