I have had the privilege (or curse?) of pursuing full-time MBA two times. And if I had enough wealth, I would pursue it again, or maybe some other higher studies such as Ph D or Masters in Economics, Masters in Policy Making etc. I enjoyed the process of learning about Critical Thinking and Analysis and honing ability to study various subjects, evaluate opinions, data, facts and form a view.
And MBA is all about “application” – through Case studies. So, let’s pick the most recent and most interesting case study – that of Mumbai-Ahmedabad Bullet Train.
As I write this post, the Indian Prime Minister Modi and Japanese Prime Minister Abe laid the foundation stone of the 508 Km long Mumbai-Ahmedabad High Speed Bullet Train project, a few minutes ago.
Here are key details of the project (Case facts):
- India’s first Bullet train is being built in partnership with Japan
- The government has set an ambitious deadline of starting the bullet train on August 15, 2022 – the day that India marks its 75th year of India’s Independence.
- The gigantic infrastructure project that is going to cost India approximately Rs 1,10,000 crore (~17 Billion USD)
- he Japanese government is providing a loan of Rs 88,000 crore at a “miniscule” interest rate of 0.1%.
- The loan can be repaid over a time span of 50 years, with the repayment beginning 15 years after disbursement. The loan interest ranges between Rs 7-8 crore a month and the government claims it will not put any strain on existing financial resources.
- The bullet train will run at an operating speed of 320 Km/hour and a maximum speed of 350 Km/hour! The 508-Km journey will be completed in 2 hours and 7 minutes and cover 12 stations
- Japan’s Shinkansen E5 series of bullet trains have been identified for the project.
- The bullet train – with executive and economy-class seats – will have 10 coaches that will be able to seat as many as 750 passengers.
- Later, Indian Railways proposes to add 6 more coaches to take the seating capacity to 1,250 passengers. Initially, 35 bullet trains will be operated.
- By 2053 this number is likely to go up to 105. The bullet trains are expected to do 70 Ahmedabad-Mumbai sorties in a day. While 24 bullet trains will be imported from Japan, the rest will be manufactured in India
- According to the government, the project is likely to generate employment for about 20,000 workers during the construction phase.
- Safety: The train delay record of Shinkansen is less than a minute with zero fatality, says Japan. Not only that, the technology for disaster predictions and preventions will also be acquired.
- This would make sure safety is maintained in case of any natural calamity such as an earthquake etc. Modi government hopes that with this technology, India will leapfrog to the cutting edge of latest train developments.
- One of the biggest benefits of the bullet train project will come from the fact that Indian engineers and labour will gain knowledge and skills to ‘Make in India’ the parts and rolling stock. This, in turn, would be beneficial for future high-speed rail projects that are being planned for other routes in the country – and as Railways Minister Piyush Goyal said – we may even start exporting!
- The Maharashtra government is still undecided on where the bullet train will end in Mumbai. The state government this week agreed to spare 9,000 sq metres plot for the station at the Bandra-Kurla Complex on the condition that the railways assess suitability of an alternative site.
- At their summit talks today PM Modi and Mr Abe are expected to focus on bolstering defence and security ties. They are also expected to discuss cooperation in the nuclear energy sector. The recent nuclear test by North Korea will come up during the talks, officials said.
- Benefit for Gujarat: An agreement between the Japan International Cooperation Agency and the Gujarat Maritime Board for developing the Alang shipbuilding yard, besides the establishment of two industrial parks, will be on the table during Abe’s visit. According to Gujarat Chief Secretary, JN Singh, 15 Japanese companies are keen to invest in Gujarat and will be signing agreements with the state government. Some of these companies include Moresco, Toyoda Gosei, Topre and Murakami.
Here is a good 2015 article about Economics of Bullet Train written in connect of Mumbai-A’bad Bullet Train proposal then.
Now you must keep in mind “What’s In It For Me” (Link: http://www.urbandictionary.com/define.php?term=WIIFM ) question and apply it for different stakeholder groups.
For example, WIIFM from Japan’s perspective. Why would they provide loan at such low interest rates of 0.1% and provide technology? What do they get?
Think about WIIFM from different stakeholder perspectives – some of the key ones are: PM Narendra Modi (the individual), BJP Government at the Center, BJP Government in the state of Gujarat (remember, Gujarat state elections are due in few months), BJP-Siv Sena state government in Maharashtra, the commuters (who can take slow and cheap train or a fast and expensive flight, as of now, to travel Mumbai-Ahmedabad), business communities in Gujarat (Surat, Ahmedabad etc) and business communities in Mumbai (again Gujaratis?), the Indian Railways (getting technology know-how, developing skills in operating High-speed trains), the social and environmental groups (massive displacement due to land acquisition and some part of the route is submarine), the new commercial opportunities along the train route/stations (malls at and around the train stations), the public at large (tax burden, cess, toll?).
The more you start thinking, the more you can identify stakeholder groups. And different aspects how they are linked such as – Economic, political, sociological, environmental, international relations (Japan as an investor and ally – to counter China threat).
For now, I leave it up to you to think about this case study from various angles. Will write a follow-up post on this in due course. Maybe my analysis, or just updates about the project.
The ACTUAL COST of the Mumbai-Ahmedabad Bullet Train project may be only about Rs50,000 crore, which has been MASSIVELY INFLATED to Rs1,10,000 crore to cover the PROFITS and the AMOUNT for the long-term rate of HIDDEN INTEREST!!! Let us forget that the Japanese industrialists are so STUPID as to SUFFER HEAVY LOSSES by offering INTEREST-FREE LOANS on such big projects for a long period of 50 years, which can make Japan become COMPLETELY BANKRUPT!!!