Indian Railway is the third largest railway network in the world comprising 119,630 kilometres of total track and 92,081 km of running track over a route of 66,687 km with 7,216 stations at the end of 2015-16. What will be the effect of upgrading this track to high speed in terms of benefits to the country and also cost.
The 500 km, bullet train project is a pilot that will help in executing future projects with more effectiveness and efficiency. Why will a person pay the same cost for a plane and train. If it takes the same time, train is more comfortable with better seats and leg space.
30 July 2016
Is it profitable?
Yes, it makes sense with the financing terms given by Japan and growth prospects of India which may strengthen rupee.
Japan will loan India Rs. 79,000 cr. for 50 years at 0.1%
Interest per year 79 crores.
The project cost is about 98,000 cr. over 7 years, with 500 kilometer of railway lines laid
Assume 36 trips per day, in each direction – total 72 trips.
Assume 1,000 passengers per trip - 72,000 passengers a day.
At a ticket price of Rs. 3,000 per trip, that’s about Rs. 21 cr. of revenue per day.
Assume that occupancy only for working days, about 250 days in a year giving about Rs. 5,000 cr. of revenue.
Assume 20% gross profit EBIT – Rs. 1,000 cr. of pre-interest profit per year.
RS. 79 crore interest per year can be paid.
The principal amount per year, after the 15th year, will be about Rs. 2,000 cr. per year.
It can be paid out of depreciation and EBIT. Railways have additional sources of income from monetizing station space and facilities.
This initial project will reduce cost for further projects like Mumbai - Pune and Ahmedabad - Delhi. Country has to be connected through high speed trains.
Updated 21 September 2017, 30 July 2016