There is a push from the military for this line.That's why the proposal even came up despite the negative returns.
The broad gauge line is required for quick mobilization of military equipment.
For tourism, and even the local traffic, an MG line would be very economical and the rolling stock from the mainland routes which are going through GC can be sent here instead of scrapping them.
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more... This proposal for a MG/NG line was in fact put forward a few times in the past as well). Andaman had a NG tramway (light railway which even had a locomotive working on it) for many decades between Wimberleyganj and Shore Point (with many branches) called the 'Wimberlygunj Forest tramway'. It was proposed to convert portions of this into a light railway to serve Port Blair and the surroundings, but the proposal never took off.