Mumbai-Ahmedabad bullet train is an expensive toy and misguided decision
India and Japan signed a Memorandum of Understanding (MoU) on Sunday, 13 December for the development of a high speed rail corridor between Mumbai and Ahmedabad using the Japanese Shinkansen (Bullet train) technology.
The project is estimated to cost Rs 98,000 crores, to be funded largely by a concessional Japan International Cooperation Agency (JICA) loan. This has been publicised as a great achievement, a highly desirable and valuable outcome of the visit of Japan prime minister Shinzo Abe to India.
The reality, however, is very different. The Mumbai-Ahmedabad bullet train project is not good value for money. It is a very expensive toy, a complete misallocation of scarce resources, representing absolutely wrong prioritisation of objectives.
Japan has been pursuing the Mumbai-Ahmedabad bullet train project for a long time as it gives them an opportunity to market their over-priced technology and utilise their idle high-speed train manufacturing capacity.
They had pushed very hard for this project prior to the visit of prime minister Junichiro Koizumi to India in April 2005, and they had found surprisingly willing partners in the Railway Board and the Ministry of External Affairs (MEA). RK Singh, the then chairman of the Railway Board and Rajiv Sikri, secretary (east), MEA were enthusiastic supporters of the project.
However, the matter required formal clearance of prime minister's office (PMO) before inclusion in the agenda of the foreign dignitary's visit.
I was joint secretary to the prime minister at that time, looking after economic sector issues, and was a key participant in meetings held in the PMO to discuss this issue. RK Singh and Sikri argued strongly in favor of the bullet train, essentially on the ground that India would benefit from transfer of technology.
I opposed the concept, arguing that there are many other railway projects of higher priority and that investment of Rs 50,000 crores (the estimated cost in 2005) on the bullet train would be a complete misallocation of scarce resources.
The issue was clinched when I asked RK Singh whether he would have chosen to invest Rs 50,000 crore on the bullet train if the JICA loan funds were not available and the money was to be provided from the Railway budget.
Surprisingly, he stated that under those circumstances, he would not choose to make the investment. It became clear immediately that the arguments in favor of the bullet train project were not based on genuine infrastructural needs of the Indian Railways but were driven by the fact that easy money was being provided by Japan for taking up this project.
At this stage in the meeting, Rakesh Mohan, who was the then finance secretary, made a very helpful observation. He stated that he would not go for the bullet train project even if the Japanese provide grant assistance instead of a loan, because based on international experience, in all likelihood the Mumbai-Ahmedabad bullet train will not meet operational costs and would need to be subsidised forever.
The Japanese push for the bullet train project did not succeed in the year 2005. The PMO did not agree to the proposal. The Railways identified a much more important infrastructure project - the Dedicated Freight Corridor Project (DFCP) between Delhi and Mumbai and between Delhi and Howrah, which was posed to the Japanese as a deliverable of PM Koizumi's visit.
The MEA worked hard to achieve this outcome. Consequently, prime minister Koizumi made a statement during his visit to India in 2005 that the Japanese government will look into the possibility of supporting the DFCP by Japanese official development assistance (ODA) loan.
The project took shape with Japan’s support, and when Prime Minister Manmohan Singh made a visit to Japan in October 2008, Japanese prime minister Taro Aso pledged that Japanese ODA Loan would be provided for the realisation of the western corridor of the Dedicated Freight Corridor Project.
The western corridor of DFCP subsequently advanced to the "Delhi-Mumbai Industrial Corridor (DMIC) initiative", which is a Japanese-Indian collaborative project for comprehensive infrastructure development to create India’s largest industrial belt-zone by linking the industrial parks and harbours of the six states between Delhi and Mumbai in order to promote foreign export and direct investments.
Under the DMIC initiative, plans are also being implemented to create industrial parks and logistics bases with well-developed infrastructures in the area 150 kilometers to either side of the western Corridor. The eastern Corridor of the DFCP was later taken up with World Bank funding.
A proposal forwarded by the Uttar Pradesh government in 2013, to set up an industrial corridor along the Eastern Dedicated Freight Corridor on the lines of the DMIC, was also approved in principle by Prime Minister Manmohan Singh.
Both the western and eastern Corridors of the DFCP are now nearing completion. The DMIC is under implementation and the Eastern Industrial Corridor is under planning and design.
Thus, due to an appropriate decision taken by the PMO in the year 2005, India avoided being tricked into buying an over-priced bullet train toy. Instead, Japan signed on the dotted line to provide assistance for development of railway and industrial infrastructure in accordance with India's needs and priorities.
Unfortunately, this time we have fallen into the age old development assistance trap. Howsoever soft its terms may be, the JICA loan has to be returned. It is a tied loan, forcing us to buy over-priced technology, for a project that services travelers between two cities only, over a track length of only 500km out of the total railway network of more than 63,000km.
The Indian Railways has many more infrastructural needs of much higher priority, and Rs 98,000 crores should not be spent in trying to shift some passengers from Mumbai-Ahmedabad flights to the Mumbai-Ahmedabad bullet train.
This post first appeared on the writer's Facebook wall.