HIGH SPEED RAIL CHALLENGES OPTIONS INDIAN PERSPECTIVE International

HIGH SPEED RAIL – CHALLENGES & OPTIONS: INDIAN PERSPECTIVE International Seminar on High Speed Rail in India February 01, 2013 Vinay Kumar Singh GM (PP&D) Rail Vikas Nigam Ltd. 1

CONTENTS I. Need of High Speed Rail in India II. Key Issues and Challenges III. Implementation Options 2

WHAT IS HIGH SPEED RAIL? Ø As per UIC definition, trains running at speed of 200 kmph on upgraded track and 250 kmph or faster on new track are called High Speed Trains. Ø These services may require separate, dedicated tracks and "sealed" corridors in which grade crossings are eliminated through the construction of highway underpasses or overpasses. 3

WHY HSR IS REQUIRED IN INDIA ? 4

ENERGY EFFICIENCY High Speed saves Energy Costs and reduces Greenhouse Gases Plane 51. 1 Private Car 29. 9 Bus 18. 3 Classic Train 17. 6 High Speed Railway 12. 1 0 10 20 30 40 50 “Fuel equivalent grams” per passenger-kilometer 60

LAND REQUIREMENT Land requirements are Smaller A HSR-line allows more passengers than an six lane highway per hour Elevated rail corridors reduce the hassle of Land Acquisition. 35 m

DECONGESTION AND CAPACITY ADDITION High Speed Rail Motorway Double Track 2 x 3 Lanes 12 Trains per hour per Direction 4500 Cars per hour per direction 1000 Pax/Train 1. 7 (Average) Passengers per car Capacity = 12000 Passengers Capacity = 7650 Passenger per hour Hour Reduction in commuting time between cities and added capacity gives an excellent opportunity for decongestion of the mega urban centers and growth of smaller towns and other cities.

INCREASING URBANIZATION The major challenges faced are: Ø Major Urban centers are severely congested: Ø Dramatic growth in vehicle ownership in the past decade. Ø Accessing jobs, education - becoming increasingly timeconsuming. Ø Billions of man-hours are lost with people stuck in traffic. 700 590 600 473 500 400 377 285 200 100 0 2001 2011 2021 2030 Urban Population in India (in Million)

INCREASING URBANIZATION Explosion in Inter City Travel India’s urban population - 285 million reported in the 2001 census and 377 million in 2011 census. Mc. Kinsey Global Institute (MGI) projects - 590 million by 2030 (40% of India’s total projected population). The rapid urbanization in the country has triggered a growing demand for inter city traffic between metropolitan cities and 2 nd and 3 rd tier cities. In absence of HSR, passenger traffic of Airlines/ Car users is growing at 1520%

DECONGESTION of Metropolitan cities Tier II city S t. H ou th Wi R Tier I Tier City II Tier I City Wi Tier II city th Small towns and Tier II & III Cities HS R Tier I City

TRAVEL TIME ( Trigger for modal shift) Journey time for air travel involves travel to airport, away from city centers and waiting time at Airports. Distance between DELHI to CHANDIGARH is 245 Km. Chandigarh Airport (city centre) Delhi Airport (city centre) Plane . 75 hr 1. 25 hrs at Terminal + 1 hr Flying time 30 min Total time: 3. 5 hrs Chandigarh (city centre) Delhi (city centre) Total time: 1 hr High Speed Railway

NEED FOR HSR IN INDIA HSR is energy efficient and is less polluting than Road/Air travel. Indian imports about 80% of its oil requirement. HSR will use indigenous energy resources like thermal/hydel/nuclear based energy Economically as well environmentally, Rail based Transport system is ideally suited for India.

IMPACT OF INTRODUCTION OF HSR Introduction of TGV service in 1981 -83 Ø Existing long distance rail services have difficulties in competing with road and air modes of transport, Ø The new HSR lines can stop the decline of the railway’s share on the long distance transport segment along those corridor. Ø It provides an attractive transport offer in terms of reduced travel times and comfortable journey. Ø Despite the high investment cost it is economically sustainable and need of the hour. Evolution of first Class rail traffic in France Before and after opening of the first HSR line 14

KEY ISSUES & CHALLENGES 15

KEY ISSUES & CHALLENGES (7) Selection of Technology (6) Policy Framework (1) Political Will (2) Selection of Project Corridor(s) System Integration (3) Economic & Financial Viability (5) Land Acquisition (4) Financing HSR Project(s) High Speed Rail Development 16

(1) POLITICAL WILL Ø Each HSR corridor will have a long gestation period and will be highly capital intensive, so, strategic thinking is required at the Apex level for implementing in a programmed manner Ø Coordination among Central Government Ministries, State Governments and Government Agencies ØSuccess stories- National Highways, Airport up-gradation, Yamuna express-way 17

(2) SELECTION OF PROJECT CORRIDOR(S) FOR IMPLEMENTATION Ø Vast country – Many potential corridors - Selection of pilot Project; Ø Economically/financially viable projects to be given priority; Ø Willingness of local governments to participate in the project by way of land funding support. 18

(3) ECONOMIC & FINANCIAL VIABILITY OF THE PROJECT Ø High capital cost will impact viability Ø HSR will be a dedicated line; High demand risk due to higher tariffs as compared to conventional rail. Ø Emphasis on other alternative revenue sources like Real estate revenues, carbon credits, cross-subsidy from road/air travelers. 19

(4) FINANCING OF THE PROJECT(S) Ø The high capital costs of HSR makes it a financing challenge. Ø GOI may not fully fund the corridors. Ø Most state governments will have to raise finances by extra levies, real estate etc. even for part funding Ø Private sector may not have adequate financing capability to fund the large HSR projects. Proper project structuring by unbundling the projects into smaller packages may be essential. ØFunding by multilateral and bilateral funding agencies 20

(5) LAND ACQUISITION Ø Critical due to stringent alignment requirements Ø HSR corridors pass through conurbations or sensitive land; Ø Strong public protests adversely affecting large number of projects. ØMix of alignment choice- grade/ elevated/ tunnels 21

(6) POLICY FRAMEWORK Ø Robust policy framework for: § Seamless implementation of projects § Assurance for attracting International investors Ø Creation of National High Speed Rail Authority 22

(7) SELECTION OF TECHNOLOGY Choice of Technology: A) Fixed Infrastructure: § Mix of Embankment/Elevated/ Underground Structures and their dimensional control; § Construction Gauge; § Fencing of the complete track/elevated track; § Electrical Installations. B) Fast Upgrading Technology § Rolling Stock § Signaling and Communication § Train Control § Fare Collection 23

IMPLEMENTATION OPTIONS 24

INTERNATIONAL CASE STUDIES 25

TGV, FRANCE The rolling stock for the TGV lines is procured by SNCF and is funded through lease commitments Borrowing from the international markets to enable it to undertake major projects but not on a particular project basis. This funding is supported by government guarantee but is restricted to the amount that RFF can repay from the access fees French Govt. In fra r p er O o at The first opened in 1981 between Paris and Lyon (480 Km) and now total network 1887 km. French govt. plan to have new 2000 km HSR lines by 2020. str uc tu re M an ag er Access Charges (for use of rail infrastructure) SNCF - French national rail operator Réseau Ferré de France (RFF) – State owned 26

TGV, FRANCE § In addition to borrowings, the TGV lines have also been developed with grant funding from local sources. Funding pattern for three TGV lines are: Funding by Source French State Regional funding RFF SNCF EU Luxembourg Switzerland TGV Est 39% 24% 22% 2% 10% 4% n/a East Rhine Rhone 31% 29% 26% 4% 8% n/a 3% Concession model ► Rail operators pay an access charge based on their actual use of the infrastructure ► Demand risk lies with the concessionaire Brittany loire 32% 35% 33% n/a n/a Partnership contract Forms of PPP models followed by RFF to create Infrastructure 27 ►RFF pays a rental or availability fee based on the performance of the private sector partner ► Demand risk remains with RFF

HSL ZUID, NETHERLAND Dutch govt – 6 D&C contractors Substructur e Rail Systems Infraspeed Consortium: Fluor Daniel BV, Koninklijke BAM/NBM Amstelland NV, Siemens Nederland NV, Siemens Transportation Systems, Innisfree Limited and Charterhouse Project Equity Investment Limited 30 years Concession on DBFM (PPP) basis • 125 km line between the Netherlands (Amsterdam) and Belgium border (Schiphol). • This lines provides connectivity of Amsterdam to Brussels and Paris Passenger Transport HSA 28 Network Connectio ns One D&C contractor

HSL ZUID, NETHERLAND The PPP did not include the transfer of any demand risk. Infraspeed is remunerated on an availability basis, subject to deductions for unavailability of the infrastructure. The Dutch government finances: Ø The substructure of the HSL Ø The PPP infrastructure payments to Infraspeed Ø These are partly financed by revenue from HSA Total costs: € 7. 2 bn. The value of the PPP element of the project was approximately £ 1 bn. The £ 1 bn project financing for the PPP includes: Ø € 605 m syndicated term loan (comprised of two Senior loans with a term of approximately 27 years) Ø € 119 m subordinated debt bridge facility Ø € 15 m working capital facility. 29

TAIWAN • The link Taipei to Kaohsiung - total length of 345 km. • The project had a construction value of approximately US$18 bn. • A concession to finance, construct, and operate the High Speed Rail System for a period of 35 years and a concession for HSR station area development for a period of 50 years. Taiwan Govt. In 10 % of yearly earnings to government for further HSR development during the HSR operating concession period regardless of the performance of the concession company. The accumulated amount could not be less than US$3. 4 bn. Consortium led by Kawasaki Heavy Industries Procurement of Rolling Stock 30 fra str uc t • Demand risk transferred to the private sector operator ur e. M an ag er Taiwan High Speed Rail Corporation: Alstom Transport SA of France and Siemens AG of Germany

IMPLEMENTATION OPTIONS Considering the case studies, following could be the implementation options Ø Non – PPP Option: The project are implemented by the Government on EPC basis Ø PPP Options Ø Option 1: Design, Build, Finance, Operate and Transfer (DBFOT) of the entire project by a single Private Developer Ø Option 2: Unbundling the project into different components, so as to make the project components attractive to private players from the perspective of affordability in terms of size and risk allocation: Ø B&T (Fixed infrastructure) Ø DFOT (Train operations) 31

IMPLEMENTATION OPTIONS Ø Whether project is implemented through PPP or partial Government funding route, pre-construction activities should be started in a programmed manner – Government guidelines Ø MOR has already created a company named High Speed Rail Corporation of India as a subsidiary of RVNL. 32

FUNDING OPTIONS Ø Project Development Activities Ø A separate fund may be created Ø To be recovered from viable projects along with additional fee Ø Rolling fund for further project development activities Ø Funding Support for PPP projects: Ø Viability Gap Funding Ø Multilateral/Bilateral loans by providing Centre government guarantees Ø Centre government guarantee for Long term Bonds of Project SPVs 33

FUNDING OPTIONS Ø Funding Support for Non-PPP Projects Ø Directly funded by Centre/State Governments Ø Other Sources of Funds Ø Revenue share from Concessionaires (train operators) Ø Contribution from State Governments Ø Real Estate Development 34

STATUS OF PREFEASIBILITY STUDIES Project Corridors Status of Prefeasibility Studies Pune – Mumbai - Ahmedabad Final Report submitted. Delhi – Agra-Lucknow-Varanasi. Patna Final Report submitted. Howrah –Haldia Final Report submitted. Hyderabad-Dornakal-Vijaywada. Chennai Draft Final Report submitted. Chennai-Bangalore-Coimbatore- Thirvanantpuram Draft Final Report submitted. Delhi – Chandigarh - Amritsar Consultant yet to be engaged Delhi-Jaipur-Ajmer-Jodhpur Consultant yet to be engaged 35

THANK YOU 36