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Bullet Train Ahmedabad to Mumbai – Amazing Piece of Financial Engineering by PM Modi

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We have seen many posts criticizing the Govt’s MOU with Japan on the Bullet train. Most of the people have just seen only 2 phrases “ Bullet Train”, “$12 bn” & “100,000 CRORES” before criticizing.

As an addendum, comments like –

– Doesn’t the Govt/Railways have anything better to spend so much money on?

– This kind of money can help improve other aspects like comfort, security, etc in Railways… and many more. Unfortunately, very few tried to check the details before jumping to conclusions and criticism.

 

A few counter-arguments in favor: Why Ahmedabad-Mumbai ?

– Highest full-fare paying and one of the highest rail traffic in India (Try booking a Gujarat Mail ticket a month in advance)

– Feasibility Study was already done (takes 5- 7 years to complete)

– Maximum number of business travelers.

– India’s biggest trading cities connecting with 2 manufacturing/trading cities between them (Mumbai-Surat-Vadodara-Ahmedabad)

– Entire land at sea level for faster execution.

– Best & easiest Land Acquisition laws in Gujarat helping faster execution.

– Can be easily extended till Pune, giving easy Connectivity to Central Maharashtra.

 

Financials of This Bullet Train Project :

– This is a project without budgetary support (means Money isn’t shelled by either GOI , i.e. taxpayers or Railways)

– Japan is funding the entire project cost.

– The Train and related infrastructure will take 7-10 years to build. Repayment moratorium of 15 years, i.e. 5 – 8 years revenue headstart. Loan repayment duration is 50 years (after the first 15 years holiday)

– Rate of Interest is 0.1% !!!

THIS IS the real achievement. Like someone giving you free money.

– It isn’t the cost of the product, but its financing that makes anything accessible and affordable. Think of your finances when you bought your first house. ( Your salary, the EMI’s and cost of house)

– Basically, the train will pay for the loan directly from revenue accruals apart from running costs. (Train Operations could also be outsourced on a BOOT / Revenue sharing model)

An Air ticket between Ahmedabad-Mumbai , that costs an average of Rs.3,000 today could cost Rs. 4000-5000 after 7 years factoring inflation & other costs.

– Current capacity of airlines between Mumbai-Ahmedabad (at 20 flights/day & 70% occupancy) is around 3000 seats. A train covering 500 kms in 2 hrs with likely halts at Surat and Vadodara at 70% of these rates will only provide additional impetus to the economy.

– Won’t you individually prefer this train to flight as it would save at least a couple of hours extra (airport travel + 1 hr check-in) and additional taxi fares compared to flights?

– This train will provide incremental connectivity to the proposed DMIC (Mumbai-Delhi Industrial corridor) already in progress (With Japan’s help again) Imagine the size of Indian economy after 15-20 years even at current 7 % GDP growth rates. This amount will seem a pittance.

If You Still Hate Our Prime Minister?! Please Think Again…

Personally I feel this is an amazing piece of Financial Engineering. I Support Narendra Modi.

Vibrant Saurashtra 2016 Promoted by Maffat
Vibrant Saurashtra 2016 Promoted by Maffat


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