Conflicting versions on Telangana govt’s proposed takeover of Hyderabad Metro Rail

Conflicting reports have emerged over the Telangana government’s plan to take over Hyderabad Metro Rail from L&T, with the Centre reportedly advising the State to fund the project independently.

Hyderabad: Conflicting versions continue to emerge over the State government’s proposed takeover of Hyderabad Metro Rail from L&T, months after the announcement was made in April.

Following Chief Minister A Revanth Reddy’s two-day visit to New Delhi, the government announced the appointment of SBICAPS as a consultant to study various aspects of the proposal.

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Reports have now surfaced that the Central government has advised the State government to take over the Metro on its own without involving Hyderabad Metro Rail Limited (HMRL).

The suggestion is reportedly linked to the Centre’s terms and conditions 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.

Though the model of a State government executing a Metro project with its own funds has been adopted elsewhere in the country, concerns are being raised about whether it can work in Telangana.

Such a model may be feasible for Metro projects covering shorter distances. However, Hyderabad Metro Phase II spans 122 km. It also comes at a time when Metro Phase I, which covers 69 km, carries a debt burden of more than Rs 13,500 crore and equity worth of nearly Rs.1,461 crore, totalling to Rs.15,000 crore.

Questions are also being raised about the State government’s ability to raise funds for taking over Metro Phase I on its own. The government has already faced criticism for raising loans worth Rs 4.14 lakh crore in just 30 months.

Financial institutions like the IRFC and others may offer loans for rail infrastructure projects at relatively lower interest rates. However, securing similar rates for a State government-led takeover of Metro Phase I could prove difficult, according to a leading financial advisor.

“If the State government can secure a loan at 4 per cent interest as being claimed, it is good. But if the interest rate increases, it will result in an additional financial burden,” the financial advisor said. He added that the government may have to sell land or other assets to repay loans in such a situation, as servicing the existing debt itself remains a challenge.

Amidst the conflicting versions, a senior official from HMRL said to the best of his knowledge the Central government has not asked the State government to raise funds directly for Metro Phase I takeover.