The estimated NT$55.4 billion (US$1.8 billion) cost of extending the high-speed rail from its southern terminus in Kaohsiung to Pingtung County is affordable, Directorate-General of Budget, Accounting and Statistics (DGBAS) Minister Chu Tzer-ming (朱澤民) told members of the legislature’s Finance Committee on Monday.

Top finance, national development and transportation officials, as well as Taiwan High Speed Rail Corp (THSRC) chairman Chiang Yao-chung (江耀宗), were invited to report before the committee on the project announced by Premier Su Tseng-chang (蘇貞昌) on Sept. 10.

Critics have branded the project a waste of money and a ploy by the Democratic Progressive Party (DPP) to gain votes in the Jan. 11 elections.

The Ministry of Transportation and Communications has estimated that building the 17.5km extension — from Zuoying Station, the current terminus on the high-speed rail line, to Lioukuaicuo Station, one stop west of Pingtung Station on the Taiwan Railways Administration’s (TRA) Pingtung line — would cost at least NT$55.4 billion, not including the cost of purchasing rolling stock.

Based on a 30-year operational period, the project would have a benefit-to-cost ratio of 0.961, and net proceeds would fall short of investments, a rate of return of minus-2.1 percent, a ministry report showed.

Allaying some lawmakers’ concerns that the financial burden would be too heavy, Chu said that setting a payback period of 10 years would require the government to allocate about NT$5 billion per year to the project, just 0.25 percent of the nation’s annual budget.

The allocation would only be 1.07 percent of the NT$467 billion budgeted next year for public infrastructure projects, he added.

“This shows that the southbound extension project falls within an affordable range,” Chu said.

Asked by reporters before the hearing whether the negative rate of return meant that the planned rail line would run at a loss and that the losses would continue for 30 years or more, Minister of Finance Su Jain-rong (蘇建榮) said he believed that “this will not necessarily be the case.”

Although the high-speed rail system, which began to run commercially in 2007, had losses in its early years, it is now profitable, Su said, adding that the price of THSRC shares has surged from about NT$10 to more than NT$30.

“You cannot base your considerations of this case on the current situation alone,” Su added. “The southbound extension is part of comprehensive homeland planning and helps balance regional development.”