The distance between Ahmedabad and Mumbai is not long enough for HSR to be a decidedly superior alternative for travellers. It may be very difficult to hit 40,000 daily travellers by 2023. If so, forget profits, even the revenue will not cover hedging costs

 

An agreement to build High Speed Rail (HSR) from Mumbai to Ahmedabad has recently been signed. A trail blazing project of this kind generally falls into a high risk, high reward category. It would be interesting to critically examine such projects. Let us first look at the project from the financial angle. The primary funding source (80%) will be a yen denominated loan at 0.1%. While this might look like easy money, there is foreign exchange (FX) risk involved. If the FX Rate moves favourably then a project can look like pure genius. On the other hand, if the FX rate moves adversely, even the most sound project can look like a financial disaster. The standard way to look at the cost of funds is to look at the cost of hedging that is take FX risk out of the equation and look at this as a rupee loan. The present cost of such a conversion is about 6% per annum (p.a.). This interest rate is lower than prevalent interest rates in India, but is nowhere as small as the headline 0.1%.

 

The Japan International Cooperation Agency (JICA) report estimates that 40,000 passengers will use the HSR daily in 2023. With an average revenue per user around the Rs3,000 mark, total revenue will be Rs4,000 crore in the first year of operations. Considering a project cost of Rs1 lakh crore, the interest/ hedging amounts to about Rs6,000 crore per year. Including operational costs will add to expenses. So in pure financial terms, this project is not viable over the medium-term. Longer-term inflation and increasing passenger numbers should help in getting to the breakeven point.

 

However, projects of this nature are seldom profitable. There are other indirect economic benefits that accrue due to infrastructure projects.

 

The quantification of these benefits is more of an art than science. A small change in assumptions will lead to a large variation in these benefits. A key metric to look for economic benefits would be the number of passengers utilising HSR, so we will scrutinise this number further.

 

At present, about 6,000 passengers travel daily in the AC chair car category on the Mumbai-Ahmedabad corridor. This number does not include overnight passengers traveling in AC classes. Fare from Mumbai to Ahmedabad in AC Chair car is Rs660. Fare for Shatabdi Express, which includes a surcharge and catering charges, is Rs955. While it is difficult to predict what fares will be eight years down the line, at present the fares are a fraction of the expected HSR fare for this sector. Thus, it will be a challenge to convert these passengers to HSR consistently.

 

About 7,000 air passengers also travel on the Mumbai-Ahmedabad/Vadodara route daily. These will be key passengers for HSR. However, even here, a significant number of these passengers are transit passengers who use Mumbai as a transit point for onward travel - both domestic and international. This sub category of air passengers will probably continue flying as it will make their transit in Mumbai easier affecting the number that can be moved to HSR.

 

There is another unique factor, which needs to be looked at closely. The Mumbai suburb of Borivali in particular and the Western suburbs in general have a high concentration of Gujaratis. Thus, residents of these localities will be important customers for an HSR that connects main cities of Gujarat with Mumbai. The planned HSR route however starts from Bandra Kurla Complex (BKC) and continues to Thane and Virar and misses Borivali completely. A passenger, say from Vadodara will have a choice of taking a normal train and reach Borivali in four to five hours. Alternately, she can take the HSR from Vadodara that will take two hours to reach Virar and take an additional hour to transfer and travel to Borivali on a Mumbai suburban local. Many passengers will take the former option. This option is compelling with little difference in travel times for all stations along the HSR except maybe Ahmedabad.

 

The same situation though to a lesser extent applies to Mumbai Central and BKC. While BKC has grown significantly in a short period, South Mumbai continues to be a major commercial destination and Mumbai Central - the current end point for trains seems to be more conveniently located. Thus, the patronage of customers will be divided.

 

While overall passenger numbers will rise with time, the possibility of this number to be anywhere near 40,000 daily by 2023 looks difficult. Getting to these numbers will be a key challenge for the project.

 

A successful implementation of the Mumbai-Ahmedabad HSR will open up the possibility of HSRs on other sectors, somewhat similar to what Delhi Metro did to Metros around the country. Conversely, an HSR service looking for passengers will have a negative effect on other HSR projects in the country.

 

Please note that in absence of concrete data, some of the numbers are qualified guesses.

 

(Nemi Jain studied Engineering at IIT Bombay. He has spent a major part of his career working in banks)

There is what is called jurisdiction. It means the area over which a court of law has the authority to hold sway

 

Many of our readers, their friends, clients or acquaintances, must have heard this line. Translated into acceptable English from Marathi, it means, ‘not our Section’. In other words, ‘Get lost. You have come to the wrong place’. Many a poor folk takes this response as the final answer. Unfortunately, it is not only the police who mouth this famous phrase. Many litigants also find solace, or rather loopholes, and exploit them. How does that work?

 

There is what is called jurisdiction. It means the area over which a court of law has the authority to hold sway. The correct appellation is ‘Territorial Jurisdiction’, as opposed to ‘Pecuniary Jurisdiction’. Territorial Jurisdiction demarcates an area where one can file a case. The guiding principle is called ‘the cause of action’, the cause being the legal problem that has been created by someone for the person affected. The origin of the problem is the place that determines the correct court, jurisdiction-wise.

 

There is a book of rules for lawyers, called The Code of Civil Procedure, 1908. Or simply the CPC. It contains a Section on the subject of jurisdiction. The subject matter has to be of a civil nature, a determination of the rights of the parties, maybe on land ownership, use, or maybe on monies owed.

There is another Code. The Code of Criminal Procedure, 1973. The Code is much older but the revision date holds good. It deals with crime. From simple abusing, to heinous murder, rape or genocide. Here, again, jurisdiction is important.

 

You be the judge.

 

A) Mr A buys a refrigerator from a shop in a small town. The shop is a branch of a very big concern having its head office in Mumbai. There is some dispute and the company files a suit in Mumbai. Is it right in doing so?

 

B) Mr B steals money from an ATM in Mumbai; next, he robs another ATM, of the same bank, in a town in Gujarat. Next, he breaks into an ATM in a village near Delhi. He is caught and found to be a resident of the village. Where can the bank institute criminal proceedings? The village, Delhi, Gujarat or Mumbai?

C) A woman from Telangana is married in Punjab where her husband has a home. The marriage takes place in Punjab. Things sour; she returns to her native place. The husband then files for divorce, in Punjab. Is he right in doing so?

 

The answer to A) is determined by the convenience to Mr A. Since he bought the refrigerator from a shop in his town, and which town has a branch of the plaintiff, the correct court of jurisdiction will be nearest the town, not Mumbai. The poor man cannot be put to loss of time, money and energy. A recent judgement of the Supreme Court in IPRS vs Sanjay Dalia, makes interesting reading on this point.

 

The thief, in his escapade from Mumbai to his native muluk, can be charged in any of the places mentioned; but convicted for all robberies on separate counts.

 

The estranged wife has an option. The husband, in spite of the fact that the marriage took place in Punjab, would have to go to Telangana; if his wife sought him to. This bending of the jurisdictional rule is to ensure less harassment for women. We believe it is correct.

 

Inter-country jurisdictions have a life of their own and would be too extensive to discuss here. Suffice it to say that the question of jurisdiction is important.

 

Then, there is the aspect about the court of lowest jurisdiction. It means that one has to approach the subordinate trial courts first, whenever possible, especially in terms of pecuniary jurisdiction. For example, the Bombay High Court now entertains suits of over Rs1 crore. For less than that, one needs to approach the city civil court. Similarly, for criminal matters, different courts have varying authority, depending on the gravity of the crime.

 

So, check the jurisdiction first. Do not rush to the High Court, no matter what the advice. You will be asked to take your papers elsewhere.

 

(Bapoo Malcolm is a practising lawyer in Mumbai. Please email your comments to [email protected])