Economics of Indian High-Speed-Rail Bullet-Train on Mumbai-Ahmedabad route

On 2017-Sep-14 Indian Prime Minister Sh. Narendra Modi and his Japanese counterpart Shinzo Abe laid the foundation stone for India's first ₹ 100 Thousand Crore (₹ 1 Lac Crore) HSR (High-Speed Rail) aka Bullet Train (between Mumbai and Ahmedabad) 500Km project implemented with 90% financial support (50 Year loan @ 00.10% interest) and technology from Japan.

the ceremony

Just by reading '₹100kCr' & '90% loan' 3 questions immediately pop up in everyone's mind. Let's see these questions & try to answer the same...

Question 1
Why is it so expensive?

The cost of 200Km Mumbai Metro project is almost exactly same. But the question is why is the cost so high? This is because the following are highly expensive:

1. Land acquisition in cities
2. Building elevated tracks
3. Building undersea tunnels
4. Labour costs in cities
5. Cost of regulations in cities
6. New safety features (no level crossings, barriers to stop cows/humans from entering the tracks) & better Signalling
7. New technology

Why not cut cost by using the existing tracks?
Why build new elevated tracks & undersea tunnels?

Because:

1. Our existing railway lines are choked.
2. Over the past 20 years, number of our trains increased drastically and have strained our tracks.
3. Many of our lines are operating over 100% of their destined load & capacity and these are the lines where most accidents happen.
4. When trains keep running without gap, gov gets lesser time to maintain tracks.

So, we need to add new lines, add new security features.

Why not fly airplanes on this route?

Because:

1. Flying everyday is a pain. Let’s say you are flying Mumbai to Ahmedabad. It takes 1.5 hours from the city to travel to the airport. Another 1.5 hours to check-in bags and security check. Another 2 hours to pick up the bags, take the taxi to get to the city. 5 hours. The bullet train will do the same trip in 2 hours.
2. You can call/browse while traveling in a train.
3. There is no air pressure affecting your ears while you travel in train.
4. You can move around full time in a train & also can always carry liquids in a train.
5. You can also keep your baggage with you in a train.
6. A lot of travelers might not be traveling between Mumbai and Ahmedabad, but instead be going to the cities in between [Surat, Vadodara, Thane, Virar, Vapi etc] - Train will support this.
7. Trains do far lesser sound and air pollution than planes.
8. Trains do not need massive terminals.
9. Trains; unlike planes; need not depend on fossil fuels.
10. As India converts to solar power at a rapid rate, all trains will run on clean power.
11. While India will have to import almost all of plane components, for railways India can do a lot of local sourcing.
12. Trains have far higher capacity than planes.

In general, whenever the distance traveled is less than 1000Km a High-Speed-Rail beats air travel hands down anywhere in the world. It would be no-brainer to take the train even with a slightly higher than airfare.

Question 2
Why did we choose the Mumbai-Ahemdabad route and not any other route; like one of the most important 'Kolkata-Mumbai' route; of India?

One most important 'Kolkata-Mumbai' route was not used because it is 3x of Mumbai-Ahmedabad and that means it would have needed 3x investments. Also, the 'Kolkata-Mumbai' route is not traveled a lot by businessmen, while the 'Mumbai-Ahmedabad' route could be.

Look at the list of largest cities in India below:
Mumbai is #1, Ahmedabad is #5, Surat is #8, Pune is #9, Thane is #16, Vadodara is #20, Vasai is #31.

1. Mumbai
2. Delhi
3. Bangalore
4. Hyderabad
5. Ahmedabad
6. Chennai
7. Kolkata
8. Surat
9. Pune
10. Jaipur
11. Lucknow
12. Kanpur
13. Nagpur
14. Visakhapatnam
15. Indore
16. Thane
17. Bhopal
18. Pimpri-Chinchwad
19. Patna
20. Vadodara

A single train line can connect them all and has following advantages too:

1. There is no other route in India with such a high number of cities.
2. This route has much more traders and business travelers who can afford a higher rate to make the line economical. 
3. This route is completely flat with no mountains to cross.
4. This route's population is quite used to train travel.
5. Indian Railways also recently clarified that Mumbai-Ahmedabad route runs at 100% occupancy. 

That makes perfect business sense for a new project. Also:

1. As Mumbai and other cities choke with overpopulation the HSR can reduce the stress.
2. Business travelers can come to Mumbai in the morning and return home at night/evening - avoiding costly stays in the city.
3. Commuters can go from Vapi, Virar or Surat and that would put lesser strain on city’s infrastructure.
4. The smaller cities along the line would develop with such a connectivity and bring their own jobs to even avoid going to Mumbai every day.
5. This can become the blueprint for massive all-India expansion creating 100s of new cities along the route. Just as what railways did 150 years ago.

HSR works only when the train takes about 2–3 hours to the destination. Anything longer, the professional travelers would take the flight.

If the model works, it can be replicated elsewhere:
Bangalore-Chennai, Delhi-Lucknow, Delhi-Chandigarh, Bangalore-Mumbai, Chennai-Hyderabad etc.

Question 3
How do we plan to repay the loan?

Lets only look at the WORST Case and you can understand the rest :)
50 years from today, at 35,000 people a day (that is a very very shy number given the fact that the Shanghai metro carries 80,00,000 people per day) and Rs3000 (that will be smaller than even peanuts by 2070) for an end to end travel that that is 10 crore collections a day. The loan repayment would be in the range of Rs. 6 crores per day and the remaining goes into operating the trains.

Sources:

Mostly copied from- Medium.com/@balajivis/the-need-for-high-speed-rail-in-india-881e7876a328

Hindustantimes.com/india-news/overworked-tracks-excessive-traffic-underinvestment-make-train-travel-unsafe/story-oFyL1NN7xtQF6etLX1tgCI.html
Indiatoday.intoday.in/story/indian-railways-to-decongest-by-laying-new-tracks-constructing-3-new-corridors/1/652543.html
Livemint.com/Politics/AXIyUTEJaxNtX0Yv7npPiO/Is-Japans-bullet-train-loan-the-best-deal-India-has-ever-ha.html