White elephants

This newspaper has reported that the Union government is drawing up plans for seven more high-speed rail routes, which may cost as much as Rs 10 trillion. The routes planned include high-traffic ones like Chennai-Mysore, but also those that appear to be driven by political considerations, such as Delhi-Varanasi. The current “bullet train” project, for a line between Mumbai and Ahmedabad, is expected to cost over Rs 1 trillion — although much of the financing is being obtained at concessional rates from the Japanese financial sector, given that Japanese technology and contractors are being used. The per-kilometre rates being proposed for these new high-speed routes are comparable to those required for metro railways in urban agglomerations — which are themselves high, given the special requirements for urban infrastructure.

The government’s ambition is laudable, but care should be taken that it does not ignore the reality. Before seeking to expand the high-speed rail network, questions should be asked regarding the learnings from the current project. The Mumbai-Ahmedabad route has been delayed. Its future is imperilled, as the Shiv Sena-led government in Maharashtra is notably cool about the project, with Chief Minister Uddhav Thackeray describing it as a “white elephant”, and stressing the environmental and livelihood costs that must be taken into account, as well as the debt burden. For such a large, lengthy, and controversial infrastructure project, a political consensus is a must. No such consensus has been developed. Like with interlinking rivers, there is every reason to suppose that such a consensus will be impossible in the absence of compelling evidence that the benefits would outweigh the costs. Only two of the eight planned corridors (including Mumbai-Ahmedabad) would be in the 300-500 km range, which is considered the “sweet spot” for high-speed rail, where it can fight off competition from other modes of transport.

In other words, investment in high-speed rail should be taken out of the political domain and transparently evaluated. The prognosis for such an evaluation is not hopeful. There are multiple cases from around the world in which political considerations, optimism, and ambition have driven the development of high-speed rail networks that subsequently proved to be enormous debt burdens. Even the Chinese network, claimed to be a major success, has left China Railways with a debt burden that is approaching $800 billion, which it essentially has no idea how to pay off. The Spanish case is even more instructive, given that it was planned decades ago. It is unclear how much Spain has spent on its network till now, but the number was supposed to be almost $140 billion by 2020. Because no comprehensive cost-benefit assessment was done, recent surveys have discovered that this money was misspent on a network that was “neither beneficial to business nor society”. Meanwhile, Spain has been saddled with a fiscal time bomb that constantly threatens its planning, even though its borrowing is underwritten by European institutions. India’s government must step back before taking on such a multi-decade commitment. At the very least, apart from a political consensus, a clear and quantitative analysis of possible costs and benefits is required. Under such circumstances, it should prioritise upgrading the existing infrastructure and raising the average speed of current express trains, especially on short-run and high-traffic corridors.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel