The Telangana government has agreed in principle to take over Hyderabad Metro Rail Phase 1 from L&T Metro Rail Hyderabad (L&TMRH), marking the end of the PPP model for the project.

As part of the one-time settlement, the government will pay Rs 2.1 billion to L&T towards its equity investment and assume about Rs 130 billion in debt, according to an official statement on Thursday. The agreement follows discussions between Chief Minister A. Revanth Reddy and L&T Chairman and MD S. N. Subrahmanyan, along with senior officials, to resolve outstanding issues and pave the way for Phase 2 of the metro project.

Initially, the Chief Minister had invited L&T to join the second phase as an equity partner, but the company declined, citing operational and financial concerns. L&T also refused to sign an integration pact between Phase 1 and Phase 2, instead offering to divest its entire stake and convert Phase 1 into a state-owned entity.

Following detailed negotiations on financials, asset valuation and debt restructuring, both parties reached a settlement to expedite Centre’s approval for Phase 2, which proposes 163 km of new lines under Phases 2A and 2B. The Centre had earlier sought clarity on integration, raising concerns over Phase 1 being privately operated while Phase 2 was state-led.