Caution on high-speed rail

There is an aura about the railways that never seems to fade. Right from the time that the first railway in Britain, between Liverpool and Manchester, ran its short distance on steam in 1830, and became the harbinger of a new technology in transportation, it has never lost its popular appeal. With the passage of time, newer and varied modes of traction have emerged. The early romance of coal and steam engines has given way to the more mundane diesel and electric locomotives; the dust and soot that used to cover the travellers has now become a thing of the past, and air-conditioned passenger services have made train journeys far more comfortable than before.

Introduction of high-speed rail has suddenly resurrected the interest in rail travel. Its emergence in the mid-twentieth century, motivated primarily by the desire to overcome the limited capacity of conventional lines and to lower travelling time, was part of the Rail Renaissance which helped the sagging fortunes of railways and turned it into a serious competitor to air and car travel, especially for inter-city journeys.

The Tokaido railway line which opened between Tokyo and Osaka in 1964 was the progenitor of high-speed rail. These trains, called Shinkansen, are now moving at 300kmph. Today, Japan has almost 2,500 route-km of Shinkansen. In the West, the French introduced the TGV with speeds up to 270 kmph, and as of now there are nearly 1,800 route-km of high-speed lines on which the TGVs operate. China, a late entrant, has been expanding its fleet of high-speed rails at a frenetic pace. Its high-speed railway network of more than 8,400 km is currently nearly four times as much as that of Japan, the next largest network in the world. The new high-speed rail link between Beijing and Shanghai was recently inaugurated with all the glitz and hoopla with which China is known to showcase its major achievements. Extending 1,318 km, spanning seven cities and provinces and moving at a speed of 186 mph, it will halve the journey time between the two cities from around 10 hours to just four hours and 48 minutes.

Indian Railways, which has kept pace with the latest advances in rail technology, has not remained immune to these developments, especially after its giant Asian neighbour made its presence felt on the scene. Ministry of Railways’ white-paper titled ‘Vision 2020’, submitted to Parliament in 2009, envisages implementation of regional high-speed rail projects to provide services at 250-350 kmph. Six routes have been identified for setting up of high-speed rail corridors. Feasibility study of the 650 km Pune-Mumbai-Ahmedabad line has already been completed and similar studies are either underway or planned for five more high-speed lines. These will connect cities where the ridership is expected to be sufficiently high to justify an adequate rate of return on investment, and where the travelling public would be willing to paying higher fares provided they are assured of faster and more comfortable journeys.

It is also reported that the Indian Railways is drafting a legislation to be introduced into the Winter Session of Parliament to set up the National High-Speed Rail Authority (NHSRA) which will be responsible for implementing and monitoring the country’s high-speed rail projects.

How well prepared is Indian Railways to enter the new speed zone? It is not a matter of inducting new technology alone but also of the massive funding this calls for. Infrastructure maintenance cost is comparable with conventional rail but the building costs and the acquisition, operation and maintenance costs of specific rolling stock make this transport alternative an expensive option. According to a World Bank report, “the construction and train-set costs typically range from $35-70 million/km depending on the complexity of civil engineering works and the degree of urbanisation along the route”.

In addition, high-speed rail projects require a very long lead time, which can add to the uncertainty over future costs and benefits. Experience has shown that passenger fares are generally insufficient to finance the capital and operating costs. In Japan, barring two lines developed in the 1960s and 1970s, where the initial investment and debt related to their construction have got fully repaid, other high speed rail lines built since 1987 have been able to recover only between 10 to 60 per cent of their construction costs through ticket revenues.

Financial success would, therefore, depend upon attracting sufficient patronage and revenue. However, even though in high density areas the high-speed rail revenues may be sufficient to cover ongoing operating costs, it remains unclear that any high-speed railways has ever made a commercial rate of return on investment irrespective of the populations served on a given route.

Attempts have been made to use Public Private Partnerships (PPPs) to finance high-speed railways. However, these have not proved successful since most of the schemes are beset with chronic low returns. For this reason, the governments in Britain, Taiwan and Netherlands had been forced to bail out the private partners engaged in such projects.

Yes, India will be well thought of if it becomes part of the exclusive high-speed league, but the cost-benefit of these projects must be fully assessed, recognising public funding as an inescapable ingredient, before taking the giant leap forward.

Will the government be able to back up Indian Railways and ensure that the projects do not run into serious financial difficulties even before they get launched? While the PPP is being considered as the most preferred route, Indian Railways, taking note of PPP experience elsewhere in the world, must move with extreme caution.

Its passenger segment is already getting cross-subsidised, in no small measure, by revenues earned from freight services. If losses on high-speed passenger services also pile up, it will further worsen the financials of this organisation, the largest public undertaking in India, which has certainly witnessed happier times in the past.

S N Mathur is former MD, Indian Railways Finance Corporation. E-mail:

mathur.surendra@gmail.com