Bullet Train – The Emperor’s White Elephant

Is the Bullet train project economically viable, or is it merely a reckless megalomaniac’s vanity project?

In 2005, He loudly announced how his investment in a gas field will make India self sufficient in Energy in two years time. Twelve years later and after spending 20,000 crores down the drain, we have no gas to show for. [1]

In 2007, He announced with much fanfare, the GIFT City near Amhedabad, with 17 Sky scrappers including a 80 storey Diamond Tower, to make Gujarat a combination of New York and California, and employ nearly a million people. [2] This was supposed to be achieved by now, but only two towers stand in the middle of no-where.

In 2011, he promised 52 Lakh Jobs in Gujarat as a result of a massive $450 Billion (Rs 20.83 Lakh Crores) investment that he had supposedly bagged.

Last year, he asked for 50 days to create an India of our dreams, free of black money, fake currency and corruption.

Now, he promises you the Rs 110,000 Crore Bullet train by 2022.


In December 2009, Railway Ministry’s 2020 Vision document [3] envisioned the following 6 High Speed Rail Corridors in India:

  1. Delhi-Chandigarh-Amritsar;
  2. Pune-Mumbai-Ahmedabad;
  3. Hyderabad-Dornakal-Vijayawada-Chennai;
  4. Howrah-Haldia;
  5. Chennai-Bangalore-Coimbatore-Ernakulam;
  6. Delhi-Agra-Lucknow-Varanasi-Patna

India and Japan signed a Memorandum of Understanding (MoU) to undertake a joint feasibility study of the Mumbai-Ahmedabad route in New Delhi in September 2013. The objective of the joint study was to prepare a feasibility report of the system with a speed of 300–350 km/h. The study was scheduled to be completed within 18 months, i.e. by July 2015.

Even before this feasibility study was actually completed, PM Modi and his then Railway minister Sadananda Gowda had already started talking about this project as if it had already been proven to be feasible. While presenting the new government’s first railway budget in Parliament in July 2014, Mr Gowda declared that India’s first bullet train will run in Narendra Modi’s home state Gujarat. At the time, he had mentioned that it will cost Rs 60,000 Crores.[4]

On 21 July 2015, the Japan International Cooperation Agency (JICA) submitted the final report on the feasibility study of the proposed high-speed rail system on the Mumbai-Ahmedabad route to the Railway Minister, estimating the ambitious project would cost Rs 98,805 crore.[5][6]

After the study of the financial feasibility of the line, the final JICA report suggests the fare of the bullet train between Mumbai and Ahmedabad should be somewhere around one and half times more than the fare of the first AC of Rajdhani Express and it would be around Rs 2,800.

It is estimated that by 2023 around 40,000 passengers are expected to avail this service everyday and only then it would be a financially viable one.

A financial rate of return (RoR) of 4 percent and an economic RoR of 12 percent had been projected for the project.

In December 2015, during an eventful trip of India by Japanese PM Shinzo Abe, that included watching the Ganga Arti in PM Modi’s constituency of Varanasi, a deal was signed between India and Japan for this bullet train.

Japan had failed to win a high-speed train deal in Indonesia earlier that year, losing out to a Chinese proposal, so it was no surprise that PM Shinzo Abe was ready to watch a Ganga Arti in order to win this deal. But what’s in it for us?


But, we are getting a Free 0.1% loan!

First Lie being peddled to the people of India by Mr Modi is that this is not costly for us as our friend Japan has done us a massive favour by giving us a “free” loan at 0.1% interest. To quote[7]

Modi said that effectively the cost of the project would be “free”. “If somebody tells you to take a loan and return it not in 10 or 20 but in 50 years, will you believe it. India has got such a friend (Japan) which has promised to provide Rs 88,000 crore loan at 0.1% interest,” Modi said.

Now, a simple look at the history of interest rates in Japanese Yen loans will tell you that they have been near zero, and sometimes even negative, in the past 10 years. India will still have to pay Yen 2900 Crore (Rs 1,700 Crore) every year.

In simple terms, anyone, with a decent credit rating, can borrow in Japanese Yen at near zero interest rates. This is a loan guaranteed by a Government, so any chest thumping over it is akin to bursting crackers over the fact that Mr Modi managed to buy petrol for you at Rs 76 per litre, which is the price everyone is paying anyways.

The Foreign Exchange (Forex) Risk

This project will earn all its revenues in Indian Rupees, to pay back a loan, over the next 50 years, in Japanese Yen. Think and understand this clearly, the Indian Rupee can depreciate or appreciate against the Yen, in Rupee terms, this loan in not free. The annual instalments of Yen 2900 Crores need not remain fixed at Rs 1700 Crore, they may go up too.

To understand this, let us say in 2007, when 1 Rupee equalled 2.5 yen, you borrow 250 Yen (100 Rupees) for 10 years at 0%. You have to pay back 250 Yen today. You realize you now need 145 Rupees to buy the same 250 Yen, as the exchange rate has now become 1.7! In Rupee terms, you borrowed Rs 100 and paid back Rs 145.

To put in simply, in the past 10 years, while you got a 0% interest loan in Yen, because of the foreign exchange rate changes, you actually paid a 45% in interest after 10 years. This is about 3.8% per annum.

Sounds scary? Far fetched? Actually, look at the chart below, I have in fact used the real average Rupee-Yen Forex rates from pre-2007 period and 2017 for my example.

Of course, the rupee can appreciate too, nobody knows. The companies who have similar forex exposure, do not want any uncertainty, so there are financial instruments such as Forex Forward contracts, or Cross Currency Swaps, that can (and most likely will) be used by our Railways to guard ourselves (hedge) against this risk. These instruments are sold by large banks. Large banks do not sell these for charity, but to earn profit. They will charge enough from our railways so that they don’t have any risk in doing this deal. In summary, yes, we can protect ourselves against the Forex risk, but it will come at a cost, which will not be 0%. You can think of this hedging as an Insurance to protect you from the adverse event, for which you have to pay a premium.

Nowhere in the financial press of today’s India, have I come across anyone talking about this Forex risk, or indeed the cost of hedging it. If the cost of hedging this Forex risk is around 4%, then this is not a financially viable project even by the feasibility study. A 10 year Indian government bond yields 6.6%, and the 10 year Japanese bond yields 0.04%. By interest rate parity, this implies a no-arbitrage 10 year Forex forward rate of about 6.5%. Or, if you buy Yen today for delivery 10 years later to hedge risk with exchange rates of Yen, you will pay around 6.5% per year more in Rupees than the spot price. If the price is any different in an efficient and liquid market, somebody can earn “free money” with very low risk by borrowing at nearly 0% in Yen, and using these funds to buy Indian Government bonds, and buying a Forward Forex contract to insure against any exchange rate risk. [8] Further, basic market economics dictates that as soon as a large number of players seek to exploit such a “Yen Carry” trade, its risk neutral profit would reach an equilibrium level of 0.

Indeed, a look at the price at which current Forex Forwards for Indian Rupees (INR) vs Japanese Yen (JPY) are being priced on Bloomberg confirms the above. We have summarized the exchange rates for each term in the table below for easier understanding.


Spot 100 58.51 0.5851 1.709109554
5 Year 100 80.15 0.8015 1.247660636
10 Year 100 106.43 1.0643 0.939584704
20 Year 100 172.7 1.727 0.579038796
30 Year 100 273.8 2.738 0.365230095

The Spot rate is the Forex rate today. Each of the Forward Rates for future delivery dates (5 Year, 10 year) is what you pay in Rupees today to lock in the exchange rate for the purchase or sale of Yen on a future date.


Passenger Numbers Needed for Break-even

The JICA feasibility study itself had suggested that the project needs to have 40,000 passengers daily at a fare of Rs 2800, in order to be financially viable. An IIM report states that if Railways set the ticket price at Rs 1,500 per person 15 years after the operation, it will have to ferry between 88,000 and 110,000 passengers every day to ensure it repays the loans on time.[9] As the capacity of the bullet train is 750 passengers, although this can possibly be increased to nearly 1000, this will need about 100 trains daily, one every 15 minutes, (or one every half an hour from each direction). Both these studies imply an annual operating cost of over Rs 4000 Crores.

Now, ignoring the fact that some of these people can take a 1 hour flight, which if booked in advance can be bought for anywhere between 1,700 to 2,700 rupees, first let us try to establish what can be the demand here?

10.8 million (1.08 crore) people were travelling across the country on its trains on any given day, which is around 0.9% of the country’s population! (Source: Ministry of Railways (Railway Board) Indian Railways’ Year Book 2012-13). The total population of Greater Mumbai region is 1.8 Crores, and that of Ahmedabad about 60 Lakhs. Add some more cities too, we are looking at a region with a population of 2.5 crores in total. Going by our national average, about 1% or, 2.5 lakhs from these cities are travelling in long distance trains every day. The IIM study would require that 40% of all long distance travellers from Mumbai are to Ahmedabad every day, and they need to take the Bullet train. Now, just look at any long distance train passing you next time. Check how many coaches are of various types. A tiny fraction of our population uses even the current Air Conditioned classes, and we are expecting so many people to afford a Bullet train fare daily? An RTI revealed that 40% of the seats in the 32 current mail and express trains between Mumbai and Ahmedabad remained vacant in the past quarter, causing a loss of Rs 30 Crores to the Indian Railways.  [10]

Let us look at London-Paris Eurostar link, another high speed rail link that connects two large cities of Europe with a combined population of about 2 Crores, that have per capita incomes that are nearly 20 times that of India. In both Paris and London, the airports are very far away from the city centre, and the Eurostar train terminals are right in the City centre. Yet there are only 18 trains daily from London to Paris in each direction. In Mumbai, the proposed Bullet train terminal at Bandra Kurla complex will present no obvious advantage over travelling to the nearby domestic airport terminal at Santa Cruz.

A bullet train network inaugurated 10 years ago in Taiwan, another country that is far more affluent than us, using the same Japanese technology, was on the brink of bankruptcy. Its seat occupancy remained below 60%, and the company was bailed out by a taxpayer funded bailout. [11]

But, this “soft loan” is specifically for this project

There are a large number of things we could have spent Rs 110,000 Crores on. Our banks are struggling under stressed Non Performing Assets, that have brought new investments and corporate borrowing to a grinding halt, Our farming sector is struggling with impact of two droughts and then DeMonetisation, We could invest a high amount on things such as Solar Power with a long term benefit for all Indians, instead of a tiny fraction of the rich amongst the Mumbaikars and Amdavadis, who already live in the relatively prosperous states of India.

Even for railways, a similar amount could have been spent on upgrading the tracks and signalling system in the whole network, revamping all rolling stock, fixing all level crossings, and improving safety on a network that causes 15,000 deaths every year, as Kakodkar committee had recommended in 2012. Instead of fixing these issues on our 65,000 Km network used by 3 Crore Indians daily, we are blowing up this amount on 500 km of bullet train tracks, that will be used by less than 0.3% of total train travellers in India, even by the most optimistic projections. [12]

The chart below shows a comparison with this huge capital expenditure, with our regular expenses on several items such as health and education.[13]

Whenever confronted with such data, I have seen many supporters of the Bullet train point out that the “soft loan” from Japan is just for this project, and not for any of these other things.

This is true.

A car company also gives you a loan only to finance the buying of its own car, not for using that fund to spend on your children’s education. We are borrowing from Japan to buy their bullet trains. Money will eventually create jobs in Japan, and boost their exports, just as a car loan helps the sales of the car company.

The question to be asked is, If you have a large home loan to pay off, you don’t have enough money to pay for your sister’s and brother’s education and marriage, your grandfather’s medical bills are rising, but your father goes to the nearby Ferrari showroom and buys a 2 Crore car just because it was being financed on a 0.1% cheap loan – to be paid after 15 years. If you father is trying to convince you that the car salesman has been a great friend by doing this “favour”, would you call it prudent? Especially when, just as you suspected, you realize that the primary motive of your father was to show off to the neighbourhood “Sharma uncle”?


Given finite funds, If India had to choose between rail services that would give the biggest benefit for money (bang-for-buck), it would opt for 160-200 kmph semi-high speed trains connecting the metros with satellite cities that would make quick getaways possible. If one could cover the distance between Delhi and say, Agra, Chandigarh or Jaipur in about one hour, it would make sense to live there and work in the Capital. Such services would de-congest the metros, bring down the cost of living, improve the quality of life and spread economic development around.

The Japanese had themselves recommended semi-high speed trains for the Delhi-Mumbai route when the western freight corridor became operational. The study for METI mentioned earlier estimated the cost of a semi-high speed line with journey time of twelve hours to be $6.85 billion (Rs 45,900 Crore). This would jump to $16.34 billion (Rs 109,500 Crore) for a ten-hour journey route, at an average speed of 140 kmph. Overnight journeys between the two metros would be possible compared to current sixteen-hour journeys by the Rajdhani at the average speed of 87 kmph.

Instead, we are now spending similar amount on a third of that route.

Cheerleaders in media, who have been telling you how great an “achievement” this 0.1% “soft-loan” is, are defending this using the usual jumlas such as “Make In India” and so on, where as in reality, there is going to be no transfer of technology in this project! [14]

It is not even clear if there was any competitive bidding process for such a huge project. Our current estimated cost is $32 Million/km. For comparison, China built its high speed network at $17-21 Million/km, and Europe at $25-39 Million/km. An average hour-long trip in the Shinkansen trains in Japan costs about $100. [15] And mind you, these high-speed trains barely make both ends meet in Japan; they do not generate any profit.

People in Japan, whose per capita income is $50,000, can afford to take such trips; how many people in India, where the per capita income is $1,500 dollars, can afford it?

With over ambitious passenger numbers to justify the ticket price, no clarity about the Forex risk, and needless chest thumping over a 0.1% loan, and the media circus, are we watching the birth of a white elephant ?


“Gujarat”s gas find is a jackpot’. 2005. Rediff. July 1. [Source]
Modi’s “GIFT” can rival Mumbai. 2007. Rediff. June 27. [Source]
Indian Railways – Vision 2020. 2009. Indian Railways . December. [Source]
Ghosh, Deepshikha. 2014. India’s First Bullet Train To Run In PM Modi’s Gujarat. NDTV.com. July 8. [Source]
Costly dream: Mumbai-Ahmedabad bullet train project to cost Rs 1 lakh crore. 2015. Firstpost. July 21. [Source]
Modi mocks Bullet train critics in style. 2017. The Financial Express. September 14. [Source]
Can one profit by borrowing in Yen and and investing in Rupee (2016) – Quora. 2017. Quora. https://www.quora.com/Can-one-profit-by-borrowing-in-Yen-and-investing-in-Rupee-given-the-exchange-rate-and-interest-environment-in-both-the-countries. Accessed September 17.
Bullet train will need 100 daily trips to be financially viable: Study. 2016. http://www.hindustantimes.com/. April 19. [Source]
Route For Planned Bullet Train Loss-Making, 40% Seats Empty, Reveals RTI. 2017. ndtv. https://www.ndtv.com/india-news/40-seats-on-ahmedabad-mumbai-bullet-train-route-in-last-3-months-vacant-reveals-rti-1769513?pfrom=home-lateststories. Accessed November 1. [Source]
Taxpayer bailout: Taiwan to rescue troubled bullet-train operator- Nikkei Asian Review. 2017. Nikkei Asian Review. https://asia.nikkei.com/Politics-Economy/Policy-Politics/Taiwan-to-rescue-troubled-bullet-train-operator. Accessed September 15.
Protecting passengers on India’s next-gen network. 2017. Railway Technology. http://www.railway-technology.com/features/featureprotecting-passengers-on-indias-next-gen-network-4532155/. Accessed September 15.
Daniyal, Shoaib. 2015. One chart that shows just how absurdly wasteful Modi’s Mumbai-Ahmedabad bullet train line is. Scroll.in. December 13. [Source]
Shinzo Abe in Gujarat: Will bullet train be a win-win for Japan and a no-win for India? 2017. Firstpost. September 14. [Source]
Cost of High Speed Rail in China One Third Lower than in Other Countries . 2017. World Bank. http://www.worldbank.org/en/news/press-release/2014/07/10/cost-of-high-speed-rail-in-china-one-third-lower-than-in-other-countries. Accessed September 15.
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  • No,No,No to Bullet Train. Simple reason: India needs Logistics development in Freight,Cargo or Commodities movement Big NO for passengers Luxury. Govt should concentrate Investment in R&D for Logistics, especially WATERWAYS.

  • Modi at his best – a dream seller.

  • Very nice analytic investigation.

  • Proverb: Katega aaur ka, seekhega naauu ka. Kins of others will suffer cuts, barbar’s kin will learn shaving.

  • PS: Not for Bhakts…..because मोदीजी का भाषण ही भक्त का राशन है

  • A very studied analysis of the pros and cons of the bullet train. It is like an unseen bullet which will shatter us to the core in the years to come……..when will the aam admi rise to the occasion that demands immediate action. ….

  • Kudos to the author for an excellent cost benefit analysis of Ahmedabad-Mumbai “bullet train”project.I have yet to see a more seminal paper on the subject.How long should we suffer the idiosyncrasies of this man ? Is there no accountability in this country? Just because you have the power, it does not mean that you can abuse it the way you like.And why everything should be Gujarat centric?

  • Our own Mexican wall which the Mexicans “will pay for” ?

  • You may remember that long back people objected to introduction of colour Tv.Huge expenditure incurred at that time proved to be a wise decision.But stop.Building a huge statue is not like that! By building a bullet train,there is no immediate benefit for the masses.After 20 years! Now a days people have become mute thinking that a dictator can use his muscle power to achieve his whims and fancies.Post GST prices are sky rocketing.Not even a single political party is raising a finger against it.A movement of common people alone can make authorities shake off their slumber.Please do your little bit.

  • My compliments to the author for dispelling quite some myths about the bullet train. I find the article to be a very well-researched piece.

  • Well researched

  • Govt’s priorities are all awry. Better to use this money to construct more toilets, improve the trains in Mumbai and all over india….safety,travel time, travel comfort,etc, eradicate poverty,give electricity to the poor,connect the villages..build roads,etc.

  • Very well explained ,the project may take off but get completed after 50years

  • A friend pointed me to this article saying that the argument made sense. With all due respect this article is crap. Half of it is based zero interest loan and how it is way of gypping Indian tax payer. Reality is do you have a better solution? 15 years from now people like you will criticize past administrations for not investing in infra. We are in this mess because of the myopic view points of the elite class. Crumbling infrastructure that only serves elite. As for constant harping on demonitazation… do you have better ideas for tax evasion? Isn’t it the moneyed class which is corrupt and crooked and also the moneyed class which is most vocal about infrastructure investments? We have become a country of nay sayers. Could you the airline industry if TATAs did not take the risk, a Rail industry if Britain did not invest or an educational system if Britain and Nehru did not invest? If Modi has a personal gain then I will understand, but why would you stop a man from experimenting?

    • Disgruntled ek-Bhakt

      Not half, but bulk of it (88,000 Cr out of 110,000 Cr) is the soft 0.1% loan. But, being such a huge amount, we still have to pay about 3,000 Cr Yen, (Rs 1800 Cr at current rates) every year.

      If Yen moves against Rupee, this amount may go up to Rs 2000 Cr, to Rs 3000 Cr in next 50 years, who knows? and to hedge (insure) against it, we will have to pay some amount, which has not been made public, but could be more than the interest paid on the loan !

      No one is saying do not spend on infrastructure, point is.. spend it wisely.. this article also points out, the same amount could be spent on railways on doing thing the Kakodkar committee had recommended, upgrading all tracks, signalling systems, and coaches in the country, would be far beneficial.

  • The article is hardly balanced. I meant half of the article is about the loan. What about the merits of acquiring the latest rail technology? You think someone will share it for free? 70 years of modern education has not produced a single technology that is Indian made. Thus the need for acquiring rail technology. How long will you keep fixing beat up infrastructure? There is such a thing called modernization. If you are incapable of meaningful innovation, get ready to pay for it!

    • Are we getting the technology to manufacture the bullet train engines in India? Please do educate me where is that factory being setup, and if that will be ready by 2022? Also, are we producing then under license from Japan, so that we can ourselves sell it to others? What is the precise arrangement?

      • Before Maruti, cars came as CKD Kits (complete knock down), same with all the other modern appliances. Importing allows India to establish supply chain and then eventually manufacturing. So what if the rail coaches are not manufactured in India. Look at the success of DMRC. No one calls it a failure. We need new technology period! Otherwise we will be riding antiquated metro like the Bombay metro.

        • For whom we are making this big project. Just answer that. I will surrender my self.

          Kindly reply with the quotations of Air ticket Price, 1AC train ticket Price.

          Keeping in mind the present condition of existing railway.

      • Once you have economic scale, technology transfer will come as well or at least will spur home grown innovation. Without the first step you will have nothing.

        • So, where is this Maruti equivalent plant to assemble the Engine kits being setup? Is it BHEL, CLW, DLW or some private player? Please provide me the references to any portions from the agreement that have this, and I shall update the article accordingly.

  • Mirza Shahnawaz Baig

    Rich’s Ride….Poors Suffer

    Rich pay the part price of the tickets and enjoy the full ride which will not cover even the cost of Bullet Train but Economy & Poors class people has to pay/suffer….. as Bullet Train Credit will be on there heads……

    Ache Dinnnnnnnnnn= For Rich

    Sabka Saath Kuch Ka Vikaaaaaaaaaaas= For Bullet Train

    Desh Badal Raha Hai= Every Indian will be in Debt

  • A very well researched and convincing way of putting perspectives
    Why not spend this money on medical education churn out cores of doctors MD, MS PHD IN MEDICAL ENGINEERING FINANCE ETC

  • Same kind of argument was given by these ppl when in conducted nuclear test, when india sent mangalyaan.

    • Yes, it is natural to raise the issue of “misplaced priorities” of our rulers when a vast majority of poor people are hungry, and don’t get clean water, or decent schools and hospitals.

      Still, Those were both results of indigenous technology, and cost far lesser.

      This one is 200 times costlier than the Mars Mission, and is financed by external debt.

  • This bullet train is make the losses suffered from the failed demonetisation exercise. The petrol price is also hiked for that only. Come elections, all prices will come down and people will clap and vote again this govt. Past is always forgotten

  • Disgruntled ek-Bhakt

    The current Executive AC Shatabdi ticket costs Rs 1928.

    Supposedly, this is with a 57% subsidy, so the break-even fare, to cover the operating costs of current Shatabdi trains could be over Rs 3000.

    Yet, we are supposed to believe that a new project with the loan of Rs 110,000 Crore, and more stringent maintenance requirements shall be viable at a similar fare.

  • Do look into this other angle:

    Maglev (Chuo Shinkansen) Maglev trains have been undertaking test runs on the Yamanashi test track since 1997, running at speeds of over 500 km/h (310 mph). As a result of this extensive testing, maglev technology is almost ready for public usage.
    Shinkansen outdated technology (the one to be sold to India) is being replaced in japan. We are getting what Japan is phasing out. Compare this with the time when Dr Vijay Bhatkar created the truly ‘Make in India’ beyond slogans – and India could have its own ingenuously researched and created Super Computer Technology. The current Make in India slogan is turned on its head by importing what the selling country has already labelled as an outdated technology.

  • You can fool the common people & when the media is overwhelmingly trumpeting you, there is no sane wise ever heard. This is a facade & tides turn overnight when reality catches with the people & this is overdue. May people use their wisdom, a little, at least to understand the gimmickry of the pied Piper of Hamlyn.

  • Bullet Train – Some Questions & Answers:

    Q.1 The Bullet train between Ahmedabad and Mumbai costs same as flight, and also takes same time. Then why spend so much money ? Why not increase number of flights ?
    Ans : A flight serves destination to destination. The bullet train will serve 12 stations in between. With 12 stations on the route having high speed connectivity, the entire stretch will develop as an economic corridor. Once the HST is functional, economic zones will come up all along the high speed network. This will create millions of jobs in next 15-20 years.

    Q 2 : Why not take soft loan of ₹88,000 crore for improving health and education rather than fancy bullet trains ?
    Ans : The low interest loan is given by any country to promote something which is exclusive to itself- be it its own technology or science or defence. Japan or France will not give you free loans for building hospitals or schools as they don’t gain anything in that scenario. The loan is SPECIFICALLY for Shinkansen technology, not for any other work.

    Q 3 : We will be dependent on them. How will it help us in future ?
    Ans. : This is not just the money or construction being done by Japan. We are also getting the technology of HST from Japan. Just like we are self-sufficient in metro today (which was also given to us by Japan), we will become self-reliant in bullet trains 15-20 years down the lane.

    Q 4 : Why Ahmedabad-Mumbai ? Why not other place ?
    Ans – As much as you cry foul, you cannot deny the fact that Mumbai-Surat-Bharuch-Vadodara-Anand-Ahmedabad is a massive industrial hub, with these places being economic, trading and financial hubs of western India. The fact that such big industrialised cities are within 500 km makes it (the project) financially feasible. Once successful, 5 more bullet train networks will also come.

    PLEASE SHARE and help in busting some misconceptions.

    To answer some of these questions, I am posting some relevant facts.

    1950s : When the country is poor, what is the need for spending crores on ISRO and BARC ?
    (ISRO and BARC are our pride today).

    1970s : A country where people can’t own a bike, what is the use of investment by Suzuki ?
    (Maruti Suzuki changed the game)

    1980s : When there is no electricity in houses, what is the use of spending on technology of TV and computer?
    (We are one of the largest users of IT today)

    1990s : When people are dying in poverty, what is the use of globalisation, liberalisation and privatisation ? Only poor will be exploited.
    (We know how 1991 changed India’s development track forever)

    Early 2000s : Delhi’s DTC buses are undergoing accidents, infrastructure is crumbled. Why not improve existing infrastructure rather than investing 80,000 crore for metro ?
    (Metro is now the lifeline of Delhi)

    Early 2000s : There arent enough basic roads in the country. Villages don’t have pucca roads. Why govt spending 1,00,000 crore for National Highways ? Improve basic roads.
    (NHs have revolutionised traveling).

    Same happened with every big initiative. Why we Indians are so negative ???

    Why can’t we be optimistic and support positive and visionary steps ?? Why do we want to cry poor, poor, poor, every time and remain one ???

    • Kudos to the nice replied answer!! I agree if we stay myopic, we stay backward. This is how progress happens. I have not seen a single valid option towards progressing towards new technology. All we hear is repair the crumbling infrastructure. Unfortunately, that only takes you so far. We need modern solutions for new age problems.

      • New Technology?

        These trains are technology from 1964.

        If all you care about is new technology, oppose this old technology, and force the government to use Hyperloop, or Maglev trains.

    • Couple of additional points:

      Maruti: Spurred Tata to develop Nano.

      Delhi Metro: DMRC now provides consulting services to other countries in the region, resulting in additional revenue opportunities.

      • Be_A_Voter_Not_A_Bhakt

        This is another false equivalence.

        A passenger car is something each of our 5-6 cores middle class families can aspire to own.

        Assuming we are getting the tech transfer to build Shinkansen engines (?) Precisely how much is the demand for Bullet train engines?

        • Would you rather have a long term public transport system which is better for economy and environment or an expensive private vehicle option which causes nothing else except pollution.

          • Be_A_Voter_Not_A_Bhakt

            The under Rs 300 ticket that 90% of the travellers between Mumbai & Ahmadabad buy, IS public transport.

            How is a bullet train with ticket costing Rs 2000+ “Public transport” ?

        • Everything is a false equivalence.. except no one has any better ideas..

          • Be_A_Voter_Not_A_Bhakt

            You are evading my basic question. A pasengar car will have demand for millions of units.

            How many people are buying bullet train engines daily? You were equating it with Maruti leading to setup of Nano etc.

    • (This looks remarkably similar to some comments I saw on whatsApp!)

      A1. The price mentioned in feasibility study (Rs 2800) was actually higher than the cost of flight at the time (Rs 1700). Also, Flight takes only 1.5 hours, this will take 2 hours for the direct link, 3 hours for the train that has 12 stops.

      A2. Already covered in article,
      1) loan is not 0.1% in Rupee terms, could be far higher.
      2) You still have to pay 3000 Cr Yen (~1800 Rs currently, much more later potentially) every year.

      A3. Show me the details of this Technology Transfer. Where is the factory to build Shinkansen Engines being built? When is it expected to be operational? What will be the demand for these? Who will we sell these engines to, ourselves? Are we getting a full license for reselling too?

      A4. Most of these things are false equivalences, they were
      a) developed indegenously at a relatively lower cost . (ISRO, BARC)
      b) Maruti is a profitable company.
      c) Were public transport projects (highways, metro), not transport for the elite.

      I do not oppose things for the sake of opposing them. Things that are beneficial, (public transport such as Metro) are obviously feasible in the long run.

  • There are innumerable things to do rather than wasting money under projects such as Bullet train, statues etc. Hope people at helm of affairs apply economics rather than politics to serve the people better

  • I did analyze the economics of bullet train on similar lines, particularly the FX angle !! I am truly impressed by your overall analysis and agree that this project is most imprudent, not the need to go for bullet train but take a 0.1 % interest loan for a period of 50 years, even if the payment starts after 15 years.
    1. first installment of interest and principle amount to start in 2032 ( 15 years from 2017 )
    2. Japanese loan in terms of Yen is about 152,000 crores ( 88000 crores with current exchange rate of 0.5786 yen to INR ) has interest component of 152 crores a year and 3,040,000 crores of 50 installments from 2032 to 2082.
    3. The loan interest is simple and not compounded.
    4. Yen was 0.355 for INR in 2007, 0.5786 in 2017, an appreciation of 62 % over 10 years, effectively meaning 5 % appreciation per year.
    5. Yen and INR can appreciate or depreciate and value need to be assumed for 2032 and beyond.
    6. No one can predict exact FX rate in 2032 but it may be safe to assume a most pessimistic for the worse, and to choose between optimistic and pessimistic view, let us assume Yen appreciates at 2 % rate to INR.
    7. Considering 2 % appreciation, the FX rate in 2032 will be 0.7787 per INR
    8. Value of loan of 152000 crore yen would be 154450 crores after attracting 0.01 % interest from 2017 to 2032 ! Payment of interest for 2032 will amount to 154 crore yen and 3040 crores ( 152000 / 50 ) yen, i.e total payout for 2032 would be 4580 Crores !
    9. India would need 2522 Crores to to buy 3040 crore yen ! ( Most Indians may believe that India need to pay only 1848 crores ( 88+88000/50 ) of rupees ) Thus 1848 crore has appreciated to 2522 crores in 2032 !!
    10. If the Yen appreciation is at current rate of 5 %, the amount would have been 2600 Crores.
    11. With yen appreciation at 2 %, India will end up paying total of 2,08,140 crores instead assumed 92400 crores against initial loan of Rs. 88000 crores !! Extra 1,15,740 INR !!
    12. With yen appreciation at 5 %, India will end up paying total of 5,18,082 crores instead assumed 92400 crores against initial loan of Rs. 88000 crores !!! Extra 4,25,682 crores !!!
    13. It is also assumed that passenger traffic between Ahmedabad and Mumbai for bullet train is 30,000 daily till 2050 and 2,30,000 there after !!! required no. of trains of 16 coaches ( 750 passengers ) will have to be 40 in either direction till 2050 ! considering operation period of train between 05:00 hours till 12:00 hours midnight, i.e. 19 hours, 2 trains per hour normally and upto 3 trains every hour will be required to operate ! i.e. one train every 20 minutes in peak period !
    14. It is also assumed that passenger traffic between Ahmedabad and Mumbai for bullet train is 230,000 daily after 2050 , required no. of trains of 16 coaches ( 750 passengers ) will have to be 40 in either direction till 2050 ! considering operation period of train between 05:00 hours till 12:00 hours midnight, i.e. 19 hours, 6 trains per hour normally and upto 8 trains every hour will be required to operate ! i.e. one train every 7 minutes in peak period! QUITE A TALL AND AMBITIOUS TARGET !!!
    15. Operating cost is expected to be around 4000 crores annually in 2032, add to that payout amount of 2522 crores, totaling 6522 crores, a safe amount of Rs. 6588 per ticket ( considering 330 days of 30000 people ) With Rs. 3000 as initial ticket in 2022 the amount will have to be stepped up to in 2032 to make it to break even !!! I am not guessing tickets in 2050 !!
    16. We will be heavily burdened with import costs for Bullet Train Components of Japanese design and source due to vagaries of FX changes !!!
    17. Doubt that this could be a FREE GIFT FROM A PERSONAL FRIEND !!!
    18. Who knows who will be at the helm of affairs as PMs in India and Japan when the first tranche of payout takes place in 2032 !!!!

    • Great work! Thanks for this. I was myself looking to price an actual cross currency swap needed to hedge the forex risk, but this is not even easy for most banks, they will definitely charge a huge premium!

      Some more comments:
      13,14) JICA Feasibility study talked of 40K passengers paying 2,800 fare. This volume is still ambitious, considering only 18K travel daily now in total. (mostly in 2nd/general class paying 300). IIM-A study says around 100K paying 1500 fare.

      As we point out, even Eurostar, linking much more affluent cities of London and Paris doesn’t have that frequency.

      18) That is my biggest worry. Just to justify this madness, Current government will NOT EVEN do anything to HEDGE the FOREX RISK. It will just be a huge burden left for our children and grandchildren to pay, who would curse us for not opposing it.

  • Kumarjyoti Talukdar

    I have today read the entire news mentioned along with the facts and circumstances and very nice description.

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  • Hi Saafbaat:

    Have you ever tried publishing your articles in any of the mainstream media? Articles like these which analyze a problem in-depth should reach far and wide.

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