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The Economics of Investment in High-Speed Rail

image of The Economics of Investment in High-Speed Rail

High-speed trains can compete successfully with road, air and conventional rail services on densely trafficked routes where willingness to pay is sufficient at the relatively elevated fare levels needed to cover costs. High-speed rail investments can also relieve congestion on the conventional rail network, and the capacity for high-speed rail to provide fast city centre to city centre services creates new possibilities for day-return business trips and short-stay leisure trips.

The long cost recovery periods for high-speed lines imply government involvement in the financing of most investments. The high costs mean that governments can be exposed to accumulation of large debts, particularly if demand develops more slowly than expected. Where high-speed rail investments are designed to promote regional integration rather than meet commercial demand, significant subsidy from central and regional governments will be needed for the construction of infrastructure and possibly also for train operations.

This report examines the key factors that drive the costs of high-speed rail investment and reviews the economic benefits delivered by high-speed rail services on the basis of experience in countries that have developed large high-speed rail networks.

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Summary of discussions

International Transport Forum

This paper summarises a roundtable held in New Delhi, India, on the 18th and 19th December, 2013. This roundtable was convened to examine the key factors that drive the costs of High-Speed Rail (HSR) investment and review the economic benefits delivered by HSR services. This summary draws on a series of presentations made to the roundtable including an international review (Nash, 2013a) and national reviews from France (Crozet, 2013a), Japan (Kurosaki, 2013a), China (Wu, 2013a), Italy (Croccolo, 2013), the UK (Nash, 2013b) and Chinese Taipei (Chang, 2013). In addition, a series of presentations surveyed the prospects for HSR in India, including contributions from Singh, Pillai, Goyal, Raghuram and Pal (all 2013), whilst a presentation on Korea (Lee, 2012) and earlier work on HSR (Asian Institute of Transport Development, 2007) were tabled. This report is also informed by introductory remarks made by Montek Singh Ahluwalia of the Planning Commission of the Government of India, Mallikarjun Khan of the Indian Railways, and K.L. Thapar of the Asian Institute of Transport Development.

In the rest of this introductory section we will outline what is meant by HSR for the purposes of this roundtable and set out a very brief history. We will then in section 2 outline some of the key objectives of the roundtable. In section 3 we will consider the related issue of the key objectives for HSR investments. The kernel of this paper will focus on the cost and benefits of HSR (section 4), including consideration of demand impacts, costs, benefits and pricing and competition. The conditions for financial and social break-even will be considered in section 5 and funding issues examined in section 6. The Indian context will be considered in section 7, before some conclusions are drawn in section 8.

English

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