On the Japan-India Bullet Train Deal: A Criticism
On February 26, 2007, senior BJP leader VK Malhotra slammed the railway budget for neglecting infrastructure and safety requirements while exposing the existing infrastructure to greater risks. This was the year when the Indian Railways put forward the idea of High Speed Rail (HSR) routes in India amongst other things in it’s 2007-08 Railway budget. Fast Forward to exactly ten years later and the BJP appears to be having a foot-in-mouth moment, saved only by the faded memory of the public. This essay aims to briefly run through the history of HSR planning in India while serving as a critique of the announced HSR project in the Mumbai-Ahmedabad corridor.
To begin with, it must be clarified that this project is not a BJP initiated one (like several others that the BJP touts as its achievements) but the project has most certainly seen a push forward under the current government. The critical question to be asked however, is whether the introduction of HSR networks in India is a rational move. In other words, is India ready for bullet trains?
To answer this question, we must first go back to 2007. In its 2007-08 budget, the Indian Railways proposed five HSR routes:
Delhi-Amritsar
Ahmedabad-Mumbai-Pune
Hyderabad-Vijayawada-Chennai
Chennai-Bangalore-Ernakulam
Howrah-Haldia
Two years later, in 2009, another route was proposed stretching from Delhi to Pune. In the same year, the Kerala State Budget proposed the Thiruvananthapuram-Kasargod-Mangalore route given it’s high population density and nearly linear geography. In 2011, at the Kerala government’s request, Thiruvananthapuram was added to the existing Chennai-Bangalore-Ernakalam route. The 2013-14 budget amended the planned Ahemdabad-Mumbai-Pune route to drop Pune from the route due to higher costs involved in the ghat section of the route. Lastly in the 2014-15 Budget, the major Diamond Quadrilateral was announced which was to connect Delhi, Mumbai, Kolkata and Chennai as well as the diagonals between them. The diamond quadrilateral project if implemented would span a route of 10,000 km.
The Central Government of India formed the High Speed Rail Corporation of India Ltd (HSRC) as a subsidiary of the Rail Vikas Nigam Limited (RVNL) - a subsidiary of the Indian Railways for the development of the High Speed Rail projects. It was launched on October 29th, 2013. The stated objectives of the HSRC are:
To undertake feasibility studies and techno-economic investigations and prepare detailed project reports and bankability reports of selected corridors.
To plan, design and freeze technical parameters including fixed assets, rolling stock and operations.
To develop financing models, explore PPP options, coordinate with stake holders and funding agencies and obtain various Government approvals.
Project development, project execution, construction, upgradation, manufacture, operation and maintenance of HSR systems on existing as well as new rail corridors.
To enter into and carry on all businesses related to HSR Systems and other rail based traffic as may be approved by Government of India or RVNL or any other Authority created by the Government for such activities.
The 12th Five-Year plan which comes to an end this year, proposed to form the National High Speed Rail Authority (NHSRA) as an autonomous body for implementation of IR’s HSR projects. While the NHSRA would be responsible for policy formation, HSRC would be responsible for implementation.
The level of bureaucratisation as is common with such large scale national projects brings to mind the works of the famous sociologist Max Weber who argued that bureaucratisation of the modern world has led to its depersonalisation. Weber was aware of the threat bureaucratic rationalisation posed to individual rationality and freedoms; the former he believed, traps individuals in a soulless iron cage of bureaucratic, rational control. The modern bureaucracy has no room for the individual or the marginalised since the “ larger whole” occupies the entirety of its volume - a fact that shall be illustrated later.
An MoU was signed between Japan International Cooperation Agency (JICA) and the ministry on October 7 2013 to conduct a joint feasibility study for the Mumbai-Ahmedabad HSR system which was to be the first project implemented out of all the HSR projects. After signing the MoU with Japan (at the end of 2015) for financing the Mumbai-Ahmedabad HSR, the government set up a panel under the NITI Aayog in January 2016 to “discuss all types of bilateral issues related to the first bullet train project of the country, including funding and regulatory matters for removing all hindrances to ensure smooth implementation”. At that time the agreement, the project was to cost Rs 98,000 crore as opposed to the Rs 1,10,000 crore in 2017 due to technical challenges involved in the implementation.
This roughly covers the brief history of the HSR projects in India so far. To gain a deeper insight into what the future of this project holds for the country, one could listen to the Prime Minister extolling the virtues of the bullet train or one could begin by taking a look at the 2013 joint feasibility study. The report states its objectives as “to ensure that if tribal populations are affected by the project are adequately and fully consulted, receive benefits and compensation equal to that of the mainstream population, are provided with special assistance as per laws and policies because of their vulnerabilities vis-à-vis the mainstream population, and to receive adequate protection against project adverse impacts on their culture identities”. The focus of the report is therefore on the indigenous communities that live on the lands between Mumbai and Ahmedabad and whose lives will be impacted by the implementation of the project.
A primary survey was conducted in the report to capture the perception of the indigenous communities in the districts of Palghar (Maharashtra) and Valsad (Gujarat) about the project and its likely impacts. The survey found unsurprisingly that 69.9% of those surveyed from these two districts were against the project. Further queries on the reasons for such a strong negative opinion revealed deep seated fears and apprehensions in the tribal communities over some real and plausible dangers this project would pose on them. All of the respondents cited loss of physical assets and residential structures in particular as their primary reasons. Reduction in air quality and noise pollution was cited by 32.3% and loss of income was cited by 20% of the respondents. Some of the other reasons included loss of farmland (13.8%), split of community (13.8%), difficulty in commutation (13%) and loss of working/market place (7.7%).
All of these fears are justified and are becoming increasingly real as the BJP attempts to speed-track the project by advancing the deadline to 2022 in order to coincide with the 75th anniversary of India’s independence. It is important to note that the Japanese counterparts recommended 2023 as the deadline of the project and this push for speedier implementation by the ruling party simply reflects and amplifies the motivation for introducing such a project in the first place. The introduction of bullet trains in India is not arising out of a longstanding public demand or out of economic incentives (which there are almost none) that would benefit the entire country. The bullet train is simply a showpiece to be used as the new opioid of the masses. An opioid that doesn’t instil one with religious dogma but with a false sense of national pride in something of marginal benefit to a tiny section of society. The opioid is of state dogma.
Whether the government can complete the project one year ahead of time is of little to no importance. The question that must weigh heavily on the shoulders of the state however, is at what cost will this speed-tracking come at? In all likelihood, the burden must be borne by the indigenous communities whose voices are seldom heard. And the signs of this are already starting to show. On September 14, 2017, while Modi went into the raptures about the enormity and significance of this project in Sabarmati, thousands of tribals associated with the Bhoomi Sena in Palghar district, along with several other organisations held a black flag demonstration to protest against the project. The tribals also alleged that the PM violated the very basics of the Panchayat Extensions to Scheduled Areas (PESA) Act,1996 as the tribals were not taken into confidence at all, for the project. Is it rational then to sit back and hope for the state to miraculously complete the project on record time without affecting these communities? The newly appointed advisor to the project, Sanjeev Sinha, has in fact urged the two states of Maharashtra and Gujarat to speed up the land acquisition process to meet the new deadline. Acquire from whom is a question left out in the mind and the words of the state as it has time and again.
The feasibility study also revealed that 84.5% of residences would be lost in the districts of Palghar and Valsad. Moreover, 34.6% of roads and 41.2% of electricity poles would be lost in these areas during the construction of the HSR network. The report recommended a compensation budget of Rs 9.2 Crores overall to the indigenous communities in the surveyed regions. History has repeatedly exposed the inefficiencies in the government to provide for compensations to the marginalised, an effect of the bureaucratisation described eloquently by Weber. Civil Society must play a huge role in fighting for the indigenous communities and in making sure that their voices aren’t cut off by the sounds of the machines fated to overrun their lands and their lives.
Over 200 ST structures will be affected by the project in the districts of Palgarh and Valsad alone as per the feasibility report. However, the real number will be significantly greater since the report doesn’t take into account “land losers” and moreover doesn't take into account the several households outside these districts that will be enormously impacted as well.
The previous section looked at the impact of the indigenous communities in detail. We shall now take a look at the logistical and economical aspect of this project on a larger scale. To begin with, the cost of the project itself is a warning sign for anyone who believes in the rational usage of resources. Out of the 1,10,000 Crores required for the project, the Japanese government led by Shinzo Abe has offered a 50 year loan of 88,000 crores at 0.1% to India. Modi has claimed that the bullet train project offered to India by Japan is nearly free of cost which is an unbelievably absurd statement to make. What is even more absurd perhaps, is the ruling party’s success in misleading a large section of the media into believing this absurdity and reinforcing it in flashy headlines. To put it factually, 80% of the total costs for the project is to be funded by Japan at 0.1% interest rate with repayment starting in the 16th year. While the 0.1% interest rate may seem like a fantastically low amount and the time of 50 years to repay the loan may seem sufficiently long enough, what the Prime Minister fails to point out is the exchange rate risk. The exchange rate of the two countries is determined by the inflation differential which is expected to be approximately 3% between the two countries over the next two decades as pointed out by M.K Venu of the Wire. This means that with reference to Japan, the rupee is likely to depreciate by 3% each year. Therefore in a span of 2 decades, it is likely to depreciate by 60%. Assuming that this rate roughly stays constant even after two decades, during the 35 years that India will have to repay the loan, the value of the rupee could depreciate by 105% with respect to Japan which would mean that a loan of 88,000 Crores today would amount to a repayment of over 1,80,000 Crores at the end of 50 years. What also needs to be taken into account is that given the state of research and development in India, we are forced to use Japanese equipment and contracting which does not come for free. At the end of 50 years, India could therefore end up paying a much higher value of debt. A debt that is inter generational in nature. Those born today, as Modi and Abe shake hands in Sabarmati would be forced to pay back a debt decades later when they enter the workforce - an injustice that we pass on to them.
Modi has also managed to paint the loan from Japan as an act of generosity on behalf of the Japanese government. To anyone who has critically studied economics it should be clear that kindness is antithetical to the market economy. So then why has the Japanese government offered such a large loan with such a tiny interest? One of the reasons has already been mentioned, namely that in all possibility India will be paying back a larger amount than it has borrowed. Another important factor to note is that the Japanese economy is riddled with a debilitating deflation where the central bank has facilitated negative interest rates to discourage banks from hoarding cash in them and encourage them to lend to businesses. By offering the loan to India, repayable in the long term, the Japanese are attempting to temporarily ship out the excess cash resources it has, only for it to come back into their system slowly over 50 years and with a greater value than it did when it left it’s homeland. Thus it is not Japan that has shown India generosity but it is quite foolishly, the opposite.
The other claim made by ruling party and by the proponents of the HSR network is that “We’d see an entire ecosystem come up around manufacturing of locomotives and rolling stock for future bullet trains, as well as the entire component value-chain, with thousands of suppliers. ‘Make in India’ would get a fillip, and going forward India would manufacture and export bullet train technology hardware and software to other countries,” as quoted by an article by the Times of India on September 12, 2017. This too is quite untrue. The fact of the matter is that India is in no state to produce the R&D and the high manufacturing technology needed to produce the HSR networks and the bullet trains in the span of 5 years without prior development in these sectors. More importantly, in the deal with India, Japan made it a pre-condition for extending a loan that India would buy the entire rolling stock from Japan (without the additional guarantee that it would have the safety record of the Japanese Shinkansen). Japan has, in its dealings with other countries also made it amply clear time and again that it would not transfer technology to another country further disproving this notion that it would boost the manufacturing sector of India. Thus, the situation appears to be a win-win for Japan and a no-win for India.
Coming back to the question of viability of the entire project, another question that needs to be asked is what kind of ridership is needed to make this project financially viable? A 2016 report from IIM-A titled “Dedicated High Speed Rail Network In India: Issues in Development”, attempted to answer this question. Estimating an average fare of Rs 1500 for the journey, the Mumbai-Ahmedabad route would have to ferry between 88,000 to 118,000 passengers per day (the difference arising because of different operating ratios used in calculation) to be viable, i.e, the roughly 1000 seater bullet train would have to make a 100 trips in a day between the two cities which is an impossibly unrealistic figure. Moreover, the fare taken here is highly conservative as we now know that the trip could cost between Rs 3000-5000 realistically, thereby lowering the number of riders and possibly increasing the number of trips.
An important externality of this project apart from the environmental impact and the impact on the indigenous communities is the impact on the transport sector between these two cities themselves. It is well understood that the bullet train would face heavy competition from conventional rail and road transport. While adjustment of fares to face this competition either by lowering the bullet train fares or by gradually increasing the costs of competing modes of transport is one possibility, it is almost certain that the introduction of competitive public transport services in the same route as the HSR will be avoided. Thus cheaper transport services along that corridor will be suppressed and may even face gradual degradation which will affect large amounts of lower income households that live in those regions. Thus, it is highly likely that the introduction of the HSR will distort existing modes of public transport that offer cheaper travel options.
Bearing all this in mind and the several other aspects that I have not been able to capture in this essay, it seems rather clear that India is not ready for bullet trains. For a country where roughly half the population still practices open defecation and whose Human Development Index ranking at 131 (out of 188) stands at 0.624, spending over a trillion dollars on a single bullet train whose negative impacts for the country significantly outnumber its positives, is nothing short of a crime. When the 75th anniversary of our Independence comes, will we want to celebrate knowing that we have created generations of debt bearers?
On a closing note, here is a short list of projects, similar amounts of money could have been utilised for and let the reader judge for themselves, which is more important.
Expansion of existing rail networks in India 16% of which carries 60% of the traffic
Ending hunger completely in India before 2030 would cost Rupees 4.7 trillion
Completely waive off all farmer debts in the state of Maharashtra.
Provide electricity (renewable) for all in Bihar which has the highest proportions of households without electricity (75 million people) in India today.
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