Telangana Govt to take over Hyderabad Metro Phase-I, L&T exits
Telangana government has agreed in principle to take over Hyderabad Metro Phase-I by assuming Rs 13,000 crore project debt and paying Rs 2,000 crore to L&T for equity. L&T exits the project, refusing to participate in Phase 2 expansion as equity partner
Hyderabad: With L&T sticking to its stance that it wanted to exit from Hyderabad Metro Rail and divest its complete stakes, the State government has agreed in principle to take over the Phase-I Metro Rail project by taking on the project debt, which now stands at about Rs 13,000 crore. The State will also pay about Rs 2,000 crore to L&T towards their equity investment in LTMRHL as a one-time settlement.
In a press release issued by the CMO after a meeting of Chief Minister A Revanth Reddy with L&T officials on Thursday, it was stated that the conditions of the take-over would be worked out through mutual discussions and the process would be carried forward in a “carefully calibrated and mutually agreeable manner, duly ensuring all legal and statutory compliances.”
CMO sources said the in-principle agreement would be placed before the Cabinet for approval.
In its note, L&T pointed out that Hyderabad, which stood second in the country in 2014 in terms of metro network length, had now slipped to the 9th position. It said it had refused to participate in Phase 2A and 2B projects as a joint venture between the Centre and the State government, neither as an equity partner nor as part of a definitive agreement for operational integration of Phase 1 with Phase 2. It also offered its equity stake in LTMRHL to the State or Centre.
The issue dates back to when the State government submitted proposals to the Centre for sanction of eight lines as part of Phase 2A and 2B expansion, totaling about 163 km of additional metro network. The Centre expressed concern that the proposed Phase 2 was being executed by a government agency while Phase 1 was operated by a private entity. It insisted on a definitive agreement with L&T for operational integration of Phase 1 with Phase 2 to process the proposal further. With L&T refusing, a deadlock existed since November 2024.
Thursday’s meeting was to discuss a way forward, with the Chief Minister stating that the State government would prefer that L&T participated in Phase 2 expansion of the metro as an equity partner. However, L&T Group CMD SN Subrahmanyam reiterated that L&T would not participate in Phase 2 as an equity partner since it had exited the business of ownership and operation of transportation concession assets. During negotiations, Subrahmanyam pointed out that as per the Supplementary Concession Agreement signed on July 22, 2022, the State government was yet to pay Rs 2,100 crore to L&T out of the agreed Rs 3,000 crore as an interest-free loan.
According to the L&T press note, the Chief Minister then requested L&T to sign a definitive agreement for operational integration of Phase 1 and Phase 2 corridors, which would also incorporate revenue and cost-sharing mechanisms, as insisted upon by the Centre. To this, the L&T CMD said they were unable to sign the definitive agreement as they had major concerns regarding seamless train operations between the two phases and regarding revenue and cost-sharing mechanisms.
As an alternative solution, and in order for the Centre to process the proposal further, he reiterated the offer to divest L&T’s complete stake in Phase 1 to the State government, which would make Phase 1 a State government entity. Discussions were also held on financials, asset valuation, and other aspects of the Phase-I project.
After detailed negotiations, it was agreed in principle that the State government would take over the Phase-I Metro Rail project by taking over the Rs 13,000 crore debt of the project and pay Rs 2,000 crore to L&T towards their equity investment in LTMRHL as a one-time settlement.
Chief Secretary K Ramakrishna Rao, Advisor to Government of Telangana (Urban Transport) NVS Reddy, Principal Finance Secretary Sandeep Kumar Sultania, MA&UD Secretary K Ilambarithi, and others were present, along with KVB Reddy, MD and CEO of LTMRHL.
