Title - Railways' high-speed plans to hit financing hurdle

If you are travelling by a train, chances are it is moving at a speed of about 65 km/hour, which is the average speed of Indian passenger trains. The average speed for freight trains is even lower. However, if plans announced by the prime minister materialise, a speed of about 350 km/hour could soon become a reality, albeit only on the high-speed Mumbai-Ahmedabad corridor, through a dedicated wing.

The highly capital-intensive project would not just enhance speed, it would also open a whole new world of technology to the Indian Railways.

However, though the target for the completion of the project is this financial year, facts lead one to think this is unlikely. Though the proposed National High Speed Rail (HSR) Authority was announced last year, it is yet to be formed and a detailed project report is yet to be prepared. “We are currently holding discussions with Japan and France for understanding the project,” said a senior official.
Even if the project gathers pace, it may still prove a handful for the railways. Amrit Pandurangi, senior director, Deloitte, says the railways’ tight finances would make things difficult. Akhileshwar Sahay, a former Indian Railways official who has studied such projects closely, says some amount of subsidy would be necessary to make the project viable. The world over, high capital-intensive transport projects are subsidised, he adds.

The first phase of the project, to be taken up now, would account for the Mumbai-Ahmedabad (492 km) corridor, involving a cost of about Rs 63,000 crore. The Pune-Mumbai corridor would be next. These corridors were identified based on their high traffic volumes and the per capita income of Maharashtra and Gujarat. “HSR should be high speed in the real sense. If the connectivity is from centre to centre, the railways would only be able to capture rich clientele. If the connectivity is from the outskirts of a city to another city, and if the customer has to again travel inside the city to reach the final destination, it may not attract much traffic,” says Pandurangi.

The total construction cost for the Pune-Mumbai-Ahmedabad route would be about Rs 1 lakh crore. As the investment required is high, the railways would either have to opt for the public-private partnership route, or tie up bilateral funding. “A financial model is being worked out to determine the project structure, tariff, funding,” he says.

A pre-feasibility study for the Pune-Mumbai corridor was submitted in December 2010. It reviewed international HSR models, the proposed alignment, technology and rolling stock. The study also worked out costs and prepared economic, financial and environmental impact assessments.

The railways would go for bidding once the detailed project report, as well as a concession agreement, is ready. The agreement to be signed between the railways and the private company would take into account rolling stock procurement, which alone would cost about Rs 6,000 crore. Construction would take six to seven years from the time the contract is awarded.

“If this project comes up soon, India’s dependence on oil from foreign countries would definitely come down, and this would be good sign for the economy. The railways is an efficient user of fuel,” said Sahay.