Mumbai-Ahmedabad bullet train project
The total project cost of Rs 98,000 crore includes operations and maintenance ("One chart that shows just how absurdly wasteful Modi’s Mumbai-Ahmedabad bullet train line is"). It will be spread across the life of the project. The majority of it shall be required for construction and acquisition of rolling stock. It shall be spread over at least 10 years. Also, 80% of the total cost is being financed by Japan at interest rates of less than 1%.
Taking into account India's inflation rate, this is dirt cheap. And the project is not a pure waste of money. I have read studies wherein a return on investment of at least 14% is achieved through this project. No businessman would let go of such an opportunity. I believe this will let India have funds to spend on Swachh Bharat without compromising on future aspirations. – Siddharth
***
I am a big fan of Scroll's articles and am a regular reader.
Generally, when we see articles that have data and comparisons, we tend to believe that the writer has done good research. But this article is neither well written or nor well researched. I think that the writer has missed the point.
Put simply, the Rs 98,000 crore is going to be spent over at least five-seven years, which translates to Rs 14,000 crores-Rs 20,000 crores per year. The government is spending Rs 43,000 crores on highways per year. So the right comparison would be the annual expenditure on the bullet trains with the annual expenditure on other projects. – Cherian Matthai
***
A bullet train is not as important as schemes for a clean India and universal healthcare.
Mumbai and Ahmedabad are already well connected by air and passenger trains. Introducing a bullet train will not have a significant impact on trade. A bullet train that saves two hours of travel is not as important as solving the problems of those who lose time on the existing rail network because of poor management.
If we improve the railways and save people’s time, it would eventually bring enough money to build such bullet trains without the help of other countries. – Rajat
***
Let us take a step backwards and appreciate the larger picture, which is that you have used entirely false claims in your article.
You have written, and I quote, “the government of India is going to spend 41 times of its Swachh Bharat Mission outlay for 2014-'15 on building a somewhat fast train line between two cities already superbly connected by road, rail and air”.
The government of India is not going to spend any money on this project apart from land acquisition and other basic amenities such as power. All of this money is being provided by the Japanese government through long-term soft loans. Being a Public Private Partnership between High Speed Rail Corporation of India Limited and Japan Railway Group, the costs would be recovered through long-term revenue sharing.
I hope that you realise your error and will proceed to correct it as soon as possible, even though your falsified data is now out in the open and would be used by detractors to support their false claims. – Ashutosh Yadav
***
I believe this story was written in haste and without in-depth verification of the facts. Japan is funding a large chunk of the project and is offering a loan for the rest at extremely reasonable terms.
I am not a fan of the bullet train project, nor do I believe that this is going to transform India’s creaky public infrastructure. But to write that the Centre will bear the entire cost of Rs 98,000 crore is a bit too much. – Nayanima Basu
***
Publishing such articles will ruin your credibility. I do not the support the Bharatiya Janata Party, but it is obvious that the bullet train will prove beneficial to lakhs of users.
Also, is the writer aware the project is not being by funded by diverting money from other schemes? Bullet trains are a long-term solution to India’s transportation woes and needs to be supported by citizens. – Amit Prasad
***
Articles on Scroll.in usually present views and opinions in a balanced and proper manner. However, in this article, you have conveniently mentioned again and again that the government is spending Rs 98,000 crore. You have compared this amount, which is to be spent over several years, with other annual budgeted expenses. Could you please draw a chart that compares annual outlays instead?
Do you think that India should stop all investment in advancements in technology? Should we stop funding the Indian Space Research Organisation, Indian Institutes of Science, research at Indian Institutes of Technology, National Institutes of Technology and Indian Institutes of Management because they are in no going to benefit the masses? Should India stop investing in better infrastructure, especially in the case of the bullet train project which isn’t adding as much pressure to the budget you wrongly claim it to be? – Swaraj Kishore
***
The Narendra Modi government is right to go for the bullet train.The Indian Railways will get modernised. As people's expectations rise, they will demand more.
Did India really need mobile phones? Weren’t landlines sufficient? Why did we spend on the Mars mission?
Did our inward looking policies help in the past? The project is a win-win situation for both India and Japan. – Ramesh Mahindra
***
Is the bullet train project Narendra Modi’s Taj Mahal? The cost of servicing this loan will be Rs 2,800 per passenger trip. A flight between Mumbai and Ahmedabad will not cost a whole lot more. Is this project the equivalent of Shanghai’s Magliev train by Siemens?
Sorry, Modi did not get it right on this one. Also, the Japanese yen has been tricky and strong currency. The project cost could well increase over time. – Ram Karuturi
Shoaib Daniyal responds:
A number of people have pointed out that the chart compares the cost of the bullet train, the construction of which is spread out over a number of years, to yearly expenditure by the central government. By comparing two figures with unequal time periods, the argument goes that the comparison is not valid.
For example, this tweet by the director of MyGov, the government of India’s citizen-engagement platform.
A Huffington Post article says much the same thing.
Ratio of 'project cost' by 'construction period' is a meaningless metric
However, the project cost of the bullet train cannot be associated with the time period of construction. It is a one-time capital investment. One letter Scroll says, “Put simply, the 98K crore is going to be spent over at least five-seven years which makes it about 14-20 K crore per year."
This is incorrect.
This Rs 14 crore-Rs 20 crore per year figure is meaningless. For example, a bullet train costing Rs 100 crore built over five years and Rs 60 crore built over three years have the same “project cost per year” figure, but one is quite clearly very different from the other. In fact, using this metric will farcically incentivise higher construction times, since the longer the time period, the lower the project cost per year. For example, if we use this faulty metric, a Rs 98,000 crore bullet train built over 20 years would now become “better” than one built over seven years.
Ratios used to contextualise numbers
Secondly, can a one-time capital investment be compared to a yearly figure at all? It's done all the time; for example, to determine the magnitude of capital investment for companies. Companies very often compare capital expenditure to annual sales but it isn't anyone's contention that the capex must be divided by construction period to make the ratio valid.
Ratios are used to contextualise numbers. This is why, say, companies compare capex to sales ratios rather than compare capexes per se. In the same manner, by itself, a number like Rs 98,000 crore is meaningless. But when contextualised to show that the figure is 3.3X of India’s annual health budget, the enormity of the figure becomes apparent.
US richer but much more cautious about massive public spending
To compare this ratio of 3.3X, let us take the United States. The United States is also building a bullet train from Los Angeles to San Francisco. Around three times longer than India’s proposed Mumbai-Ahmedabad bullet train, the project costs have been estimated at $68 billion, making it the most expensive public works project in US history. However, again to compare with health, federal health spending in the US comes to $1.1 trillion (FY 2016). This most expensive public works in the history of the US has a cost which is only 0.06X of its annual federal health budget. Even at this tiny ratio, however, the train is facing a significant opposition in the US for being too expensive.
Given the debilitating human development indicators in India, to spend 3.3X of the federal health budget on a bullet train is a vastly misplaced priority.
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letters@scroll.in.
The total project cost of Rs 98,000 crore includes operations and maintenance ("One chart that shows just how absurdly wasteful Modi’s Mumbai-Ahmedabad bullet train line is"). It will be spread across the life of the project. The majority of it shall be required for construction and acquisition of rolling stock. It shall be spread over at least 10 years. Also, 80% of the total cost is being financed by Japan at interest rates of less than 1%.
Taking into account India's inflation rate, this is dirt cheap. And the project is not a pure waste of money. I have read studies wherein a return on investment of at least 14% is achieved through this project. No businessman would let go of such an opportunity. I believe this will let India have funds to spend on Swachh Bharat without compromising on future aspirations. – Siddharth
***
I am a big fan of Scroll's articles and am a regular reader.
Generally, when we see articles that have data and comparisons, we tend to believe that the writer has done good research. But this article is neither well written or nor well researched. I think that the writer has missed the point.
Put simply, the Rs 98,000 crore is going to be spent over at least five-seven years, which translates to Rs 14,000 crores-Rs 20,000 crores per year. The government is spending Rs 43,000 crores on highways per year. So the right comparison would be the annual expenditure on the bullet trains with the annual expenditure on other projects. – Cherian Matthai
***
A bullet train is not as important as schemes for a clean India and universal healthcare.
Mumbai and Ahmedabad are already well connected by air and passenger trains. Introducing a bullet train will not have a significant impact on trade. A bullet train that saves two hours of travel is not as important as solving the problems of those who lose time on the existing rail network because of poor management.
If we improve the railways and save people’s time, it would eventually bring enough money to build such bullet trains without the help of other countries. – Rajat
***
Let us take a step backwards and appreciate the larger picture, which is that you have used entirely false claims in your article.
You have written, and I quote, “the government of India is going to spend 41 times of its Swachh Bharat Mission outlay for 2014-'15 on building a somewhat fast train line between two cities already superbly connected by road, rail and air”.
The government of India is not going to spend any money on this project apart from land acquisition and other basic amenities such as power. All of this money is being provided by the Japanese government through long-term soft loans. Being a Public Private Partnership between High Speed Rail Corporation of India Limited and Japan Railway Group, the costs would be recovered through long-term revenue sharing.
I hope that you realise your error and will proceed to correct it as soon as possible, even though your falsified data is now out in the open and would be used by detractors to support their false claims. – Ashutosh Yadav
***
I believe this story was written in haste and without in-depth verification of the facts. Japan is funding a large chunk of the project and is offering a loan for the rest at extremely reasonable terms.
I am not a fan of the bullet train project, nor do I believe that this is going to transform India’s creaky public infrastructure. But to write that the Centre will bear the entire cost of Rs 98,000 crore is a bit too much. – Nayanima Basu
***
Publishing such articles will ruin your credibility. I do not the support the Bharatiya Janata Party, but it is obvious that the bullet train will prove beneficial to lakhs of users.
Also, is the writer aware the project is not being by funded by diverting money from other schemes? Bullet trains are a long-term solution to India’s transportation woes and needs to be supported by citizens. – Amit Prasad
***
Articles on Scroll.in usually present views and opinions in a balanced and proper manner. However, in this article, you have conveniently mentioned again and again that the government is spending Rs 98,000 crore. You have compared this amount, which is to be spent over several years, with other annual budgeted expenses. Could you please draw a chart that compares annual outlays instead?
Do you think that India should stop all investment in advancements in technology? Should we stop funding the Indian Space Research Organisation, Indian Institutes of Science, research at Indian Institutes of Technology, National Institutes of Technology and Indian Institutes of Management because they are in no going to benefit the masses? Should India stop investing in better infrastructure, especially in the case of the bullet train project which isn’t adding as much pressure to the budget you wrongly claim it to be? – Swaraj Kishore
***
The Narendra Modi government is right to go for the bullet train.The Indian Railways will get modernised. As people's expectations rise, they will demand more.
Did India really need mobile phones? Weren’t landlines sufficient? Why did we spend on the Mars mission?
Did our inward looking policies help in the past? The project is a win-win situation for both India and Japan. – Ramesh Mahindra
***
Is the bullet train project Narendra Modi’s Taj Mahal? The cost of servicing this loan will be Rs 2,800 per passenger trip. A flight between Mumbai and Ahmedabad will not cost a whole lot more. Is this project the equivalent of Shanghai’s Magliev train by Siemens?
Sorry, Modi did not get it right on this one. Also, the Japanese yen has been tricky and strong currency. The project cost could well increase over time. – Ram Karuturi
Shoaib Daniyal responds:
A number of people have pointed out that the chart compares the cost of the bullet train, the construction of which is spread out over a number of years, to yearly expenditure by the central government. By comparing two figures with unequal time periods, the argument goes that the comparison is not valid.
For example, this tweet by the director of MyGov, the government of India’s citizen-engagement platform.
Scroll website has a chart which compares total costs (over 7 years) for bullet trains with yearly budget allocations for other projects.1/2
— Akhilesh Mishra (@amishra77) December 14, 2015A Huffington Post article says much the same thing.
The bullet train between Mumbai and Ahmedabad will cost Rs 97,636 crore and will be built over seven years. Hence, the entire Rs 98,000 crore (approximately) will not be spent in one year. Given this, the comparisons with the health budget, the education budget, the road and highways budget, that have appeared in the media, are incorrect. A spending to be carried out over a period of seven years is being compared with spending carried out every year. A comparison of both over a seven-year period would have been the right way to go about it. But then things don’t look as bad as they do now.
Ratio of 'project cost' by 'construction period' is a meaningless metric
However, the project cost of the bullet train cannot be associated with the time period of construction. It is a one-time capital investment. One letter Scroll says, “Put simply, the 98K crore is going to be spent over at least five-seven years which makes it about 14-20 K crore per year."
This is incorrect.
This Rs 14 crore-Rs 20 crore per year figure is meaningless. For example, a bullet train costing Rs 100 crore built over five years and Rs 60 crore built over three years have the same “project cost per year” figure, but one is quite clearly very different from the other. In fact, using this metric will farcically incentivise higher construction times, since the longer the time period, the lower the project cost per year. For example, if we use this faulty metric, a Rs 98,000 crore bullet train built over 20 years would now become “better” than one built over seven years.
Ratios used to contextualise numbers
Secondly, can a one-time capital investment be compared to a yearly figure at all? It's done all the time; for example, to determine the magnitude of capital investment for companies. Companies very often compare capital expenditure to annual sales but it isn't anyone's contention that the capex must be divided by construction period to make the ratio valid.
Ratios are used to contextualise numbers. This is why, say, companies compare capex to sales ratios rather than compare capexes per se. In the same manner, by itself, a number like Rs 98,000 crore is meaningless. But when contextualised to show that the figure is 3.3X of India’s annual health budget, the enormity of the figure becomes apparent.
US richer but much more cautious about massive public spending
To compare this ratio of 3.3X, let us take the United States. The United States is also building a bullet train from Los Angeles to San Francisco. Around three times longer than India’s proposed Mumbai-Ahmedabad bullet train, the project costs have been estimated at $68 billion, making it the most expensive public works project in US history. However, again to compare with health, federal health spending in the US comes to $1.1 trillion (FY 2016). This most expensive public works in the history of the US has a cost which is only 0.06X of its annual federal health budget. Even at this tiny ratio, however, the train is facing a significant opposition in the US for being too expensive.
Given the debilitating human development indicators in India, to spend 3.3X of the federal health budget on a bullet train is a vastly misplaced priority.