Conflicting Versions Over Telangana Takeover Of Hyderabad Metro
RAILWAYS & METRO RAIL

Conflicting Versions Over Telangana Takeover Of Hyderabad Metro

Conflicting versions continue to emerge over the Telangana government’s plan to take over Hyderabad Metro Rail Limited (HMRL) from Larsen & Toubro, months after the announcement in April. Following the chief minister's two-day visit to New Delhi the government appointed SBICAPS as a consultant to study financial, operational and legal aspects of the proposal.

Reports have emerged that the Central government has advised the State to fund the project independently rather than involve HMRL, and that the suggestion is linked to the Centre's terms for taking up Metro Phase II as a joint venture with HMRL. Under the proposed 50:50 joint venture model about 48 per cent of the project cost would be met through loans, 30 per cent by the State government and 18 per cent by the Central government.

Although a State-funded model has been adopted elsewhere concerns persist about whether it can work in Telangana given the scale of Phase II, which spans 122 km. Metro Phase I, which covers 69 km, already carries a debt burden of more than Rs 135 bn and equity of nearly Rs 14.61 bn, totalling about Rs 150 bn.

Questions are being raised about the State government's ability to raise funds for taking over Metro Phase I on its own after it raised loans worth Rs 4.14 tn in just 30 months. Financial institutions such as the Indian Railway Finance Corporation (IRFC) may offer loans at relatively lower interest rates, but securing similar terms for a State-led takeover could prove difficult, according to a leading financial adviser, who warned that higher rates would add a further burden and might force asset sales to service debt.

Amid the conflicting versions a senior HMRL official indicated that, to the best of his knowledge, the Central government had not asked the State to raise funds directly for the Phase I takeover. The government is awaiting the SBICAPS study before deciding on the next steps.

Conflicting versions continue to emerge over the Telangana government’s plan to take over Hyderabad Metro Rail Limited (HMRL) from Larsen & Toubro, months after the announcement in April. Following the chief minister's two-day visit to New Delhi the government appointed SBICAPS as a consultant to study financial, operational and legal aspects of the proposal. Reports have emerged that the Central government has advised the State to fund the project independently rather than involve HMRL, and that the suggestion is linked to the Centre's terms for taking up Metro Phase II as a joint venture with HMRL. Under the proposed 50:50 joint venture model about 48 per cent of the project cost would be met through loans, 30 per cent by the State government and 18 per cent by the Central government. Although a State-funded model has been adopted elsewhere concerns persist about whether it can work in Telangana given the scale of Phase II, which spans 122 km. Metro Phase I, which covers 69 km, already carries a debt burden of more than Rs 135 bn and equity of nearly Rs 14.61 bn, totalling about Rs 150 bn. Questions are being raised about the State government's ability to raise funds for taking over Metro Phase I on its own after it raised loans worth Rs 4.14 tn in just 30 months. Financial institutions such as the Indian Railway Finance Corporation (IRFC) may offer loans at relatively lower interest rates, but securing similar terms for a State-led takeover could prove difficult, according to a leading financial adviser, who warned that higher rates would add a further burden and might force asset sales to service debt. Amid the conflicting versions a senior HMRL official indicated that, to the best of his knowledge, the Central government had not asked the State to raise funds directly for the Phase I takeover. The government is awaiting the SBICAPS study before deciding on the next steps.

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