Editorial 3rd Quarter 2018

     FIRE MAGAZINE EDITORIAL AUGUST, 2018ent

 

Thota Hanumaiah

Chief Editor

 

BULLET TRAIN

According to the Japan International Cooperation Agency (JICA) report, as per media, the bullet train between Mumbai and Ahmadabad would cost us Rs 98,805 crore to build the train. Each trip on this train will take 120 minutes and cost around Rs 2,800.Where as a flight ticket from Mumbai to Ahmadabad costs just Rs 1704 taking only 70 minutes of travel.

Prime Minister Narendra Modi has claimed the bullet train offered to India by Japan is virtually free of cost. A 50-year yen loan amounting to Rs 88,000 crore at 0.1 % interest is being described by the prime minister as free of cost .But, it is not so. Over 50 years, the loan repayment value will be much higher based on the inflation differential

 

Why is this? Simply put, it is because the exchange rate between the currencies of two countries is determined by their inflation differential. If India’s inflation rate is average 3% over the next two decades and Japan’s inflation rate is zero, as is widely anticipated, then it stands to reason that the rupee must depreciate 3% every year because the rupee’s value is eroding by 3% as against no erosion in the yen. So, the rupee is bound to weaken by over 60% in two decades. This means that on a loan of Rs 88,000 crore, the repayment, in rupee terms, goes up to more than Rs 1, 50,000 crore at the end of 20 years.

 

Over 50 years, the repayment value will be much higher based on the inflation differential, which is bound to persist between Japan and India because the India is a rising economy with a sizeable poor population and is striving to become middle to high income country over the next few decades. India, therefore, could end up paying a much higher value of rupee debt over 50 years. If this happens then we are not being fair to the successive generations, which will be saddled with this high debt component.

 

The Modi government has promised 'Housing for All' till 2022 and the financial requirement for the project was put at Rs 6 lakh crore. So six bullet train projects would equal to the dream of providing ‘Housing for All,’ but this scheme is not taking off because the government has cut down spending across almost all social sector schemes.

 

The question is would it make economic sense for people to use the bullet train, when cheaper and faster mode of flight transport is available and is already in use. Most people plan their business trips with economic sense of cheaper and faster mode of transport, but not the costly Bullet Train.

 

While some people would still want to take the train and we would respect the choice, the question is if India does really need a show-case project like this? And shouldn’t the government spend this money with greater wisdom?

 

Beyond the hype of bullet train, if one looks closely at the ground realities in India, and experience of other countries with High Speed Rail (HSR), it would show that extensive bullet train networks in India are not a good idea at this stage of its development. The High Speed Rail in India would be a massively expensive white elephant involving enormous public expenditure that India can ill afford, detracting from badly needed public investment in social infrastructure, rail safety infrastructure and poverty eradication, while benefiting only international corporates, local contractors and cronies, and a small number of “aspirational” elites indulging in luxury travel. In fact, skepticism about HSR in India is widely shared by many transportation experts, financial institutions, and sections of the press and even by renowned HSR engineering companies based on assessments of costs, ridership, possible ticket prices, viability and societal benefits.

The NDA Government of India ought to have done far more serious home work than what seems to have been done before making a grandiose announcement,
rather than a considered plan. Such over-ambition has become a failure in other developing countries too. Argentina embarked on a bold HSR venture in 2006 linking its three largest cities Buenos Aires, Rosario and Cordoba over a 720km line. In 2008, President Kirchner proclaimed that the project would herald “an important leap toward a different Argentina” which would soon be known for “development and modernity.” With Alstom (France) expected to build the network, French banks had agreed to long-term loans for the project but the European recession put paid to that idea. Argentina has now taken up a revised Chinese-funded project for a major upgrade and renovation of the national rail network, without bullet trains, but with “high-performance” trains with average speeds of around 160 kmph. The project will be far less expensive, will be up and running much faster.
India would do well to think along similar lines. India would certainly do well to go slow on High Speed Rail.

The figure of Rs 98,805 crore needs to be seen in the context of what we can achieve as a nation with this money.

 

An important point that needs to be emphasised is the bullet train project covering just Ahmadabad and Mumbai will cost Rs 1,10,000 crore. Just compare this with former rail minister Suresh Prabhu’s first Budget which projected a five year expenditure of a similar amount for network expansion in the entire country. Or a similar amount for strengthening safety over five years.

 

What would be your priority? After all, there should be something called sequencing of expenditure in a nation as poor as ours.

 

"There’s acute shortage of staff members in the safety category. The Safety is compromised due to lack of funds in the railways. Indian Railways has been facing acute shortage of manpower, especially in the safety categories for quite some time, and the list is getting longer with the years passing by. Broadly, it works out to 2.20 Lakh. The most crucial is the shortage of Loco pilots, track men and other operating staff. Shortage of materials is another key impediment in maintenance and upgrading of rail tracks. As a result, track maintenance, repairing of fractures and renewal of tracks; have virtually taken a back seat. Given the situation, the safety of tracks can’t be ensured. The work load has tremendously increased on the staff and they are made to work under duress, in miserable conditions.

 

The demands for loan waiver of farmers were being made since many years. Nobody sought a bullet train. The people feel that the prime Minister’s dream is not of the common man but of the rich and industrialists. 95% people are those that travel in unreserved compartments, and not in Rajdhani or Shatabdi. To them this bullet train counts for nothing,

 

 

The bullet train is a misplaced priority.

 

THOTA HANUMAIAH