Yellow Line and Geopolitics

The Yellow Line of the Bangalore Metro started operations in August. Why did it take 2 years after the completion of all construction for operations to start? Tannmay Kumar Baid and Pranay Kotasthane look into the causes.

 

The short answer? India-China geopolitics. Now for the longer version.

 

In 2019, bids were accepted for the trains. A Chinese state-owned company, CRRC, won. It was cheaper than the nearest Indian manufacturer by 2 crores per coach. The contract included a clause that 75% of the coaches be manufactured in India. CRRC was to build a new plant in Andhra Pradesh.

 

Then, in 2020, Galwan happened. India tightened its scrutiny of all Chinese investments. Cabinet clearance was made mandatory. The visa regime tightened and CRRC engineers were denied visas to come and set up the factory.

 

That apart, the usual Indian obstacles played their part. Land clearance took forever. Customs could and did hold up imports. BMRCL tried cancelling the contract but CRRC filed a court case citing factors outside their control – geopolitical moves, and COVID 19. As the case dragged on, a total standstill on the coaches ensued. Finally, the courts ruled in favour of CRRC.

 

A new approach was attempted. CRRC would have a tieup with Titagarh Rail Systems in West Bengal. But the older problem resurfaced – any interactions and investments from Chinese companies underwent a lot of scrutiny, and delays ensued. Even worse, all the delays resulted in price overshoot, negating the original cost advantage altogether.

 

What can we learn from this episode? Cutting off Chinese companies from bidding is both overkill and impractical. What then?

“While China may remain the lowest-cost option for many capital items, the structural differences in our relationship, such as the border dispute, are also fixed. Therefore, the essential calculation is whether the price advantage offered by a Chinese supplier is worth the risk of geopolitical uncertainty.”

And:

“Low-security-risk items could still be sourced globally to leverage cost benefits, while the highest-risk segments, such as core electronics or critical rail signalling, might require deeper scrutiny. Once a firm passes these requirements, it should be free to complete its project without sudden policy reversals.”

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