Wednesday, October 28, 2009

High-speed trains in India? Fingers crossed…..

Forbes magazine had an article on the introduction of high-speed trains in India that would be connecting major Indian cities and would be running at speeds as high as 350Kmph. The feasibility study is still under progress by an International Consulting firm and is expected to be complete in another 6 months. The routes that are being commissioned by the Indian railways initially for feasibility study are Delhi – Chandigarh -Amritsar and Mumbai – Pune – Ahmedabad. It’s been close to two decades post liberalization and nearly 12 years since the IT boom that bought India into the global map of outsourcing and we still are not blessed by any such high-speed rail services. The fastest known rail service we currently have is the Shatabdi that runs at about 140kmph. Connectivity in this modern era where people look to save time and are ready to pay that extra premium is becoming important and this has been a greatest challenge that we are facing over the past few years. An emerging economy like that of India needs its major cities to be connected by such fast commuting services which would ease business travelers to a large extent giving more options for them to reduce their travel time.
There is a significant addressable market in India for high-speed trains taking into account the business travelers who fly economy class, the rail passengers who travel in AC coaches and those who travel short distances (200 to 500 kms) by private vehicles. The first two segments of customers above would be a major market for high-speed trains. By targeting frequent airline travelers and premium segment rail travelers, Indian railways can possibly give sleepless nights to the disguised airline owners who are finding it difficult to control the operating costs due to high turbine fuel costs and the economic slowdown all across the globe.
There were about 77 million premium segment customers (traveling in AC coaches) for Indian railways who contributed to about USD 1 billion (Rs 5000 crore) in 2008. Speaking about the airline economy class passengers, there were about 12 to 15 million passengers (approximation) that traveled (domestic) last year and were better off as compared to the business class segment (which according to a various airline owners did not generate enough revenues due to economic slowdown). So, do we have a segment of passengers if catered to, which can bring in big moolah for Indian railways? It’s easier said than done, this will require huge investments for services, technology and maintenance apart from the cost of laying tracks and getting the coaches done.
The cost of building such high-speed tracks and trains are high and it is estimated to cost about Rs 100 crore per km to build them. Hence the cost of tickets would come with a price tag, at least Rs 5 per km, so to travel from Delhi to Amritsar which normally takes eight hours, would take about an hour and half, costing around Rs 2000. It would be interesting to see the feasibility report of the consultant organization; I am sure this will raise over a billion eyebrows and definitely put India into a new dimension.

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