Chennai Metro Phase II: Tamil Nadu Government Responsible For Entire Project Funding, No Equity From Centre

Union Finance Minister Nirmala Sitharaman clarified that the cost of the Chennai Metro Rail Phase II project would be fully shouldered by the Tamil Nadu government, reiterating that it was the state's conscious decision to implement the project as a "state sector scheme."

As a result, there will be no equity participation from the Central government.

The Rs 63,246 crore project, spanning 118.9 kilometres (km), is currently being implemented as a state sector project. Previously, the Tamil Nadu government approached the central government for funding support for the Chennai Metro Phase II project under a 50:50 equity share model. Additionally, the state has requested loan assistance from bilateral or multilateral agencies to bolster the project’s financial foundation.

With 128 stations, the second phase consists of three corridors: Corridor 3 from Madhavaram to SIPCOT (45.8 km), Corridor 4 from Lighthouse to Poonamalle Bypass (26.1 km), and Corridor 5 from Madhavaram to Sholinganallur (47 km). 

On Saturday, Sitharaman addressed questions regarding the Rs 7,425 crore funding recommended by the Public Investment Board for the Chennai Metro project, which was not cleared by the Cabinet Committee on Economic Affairs. “If there was to be equity participation from the Centre, it would be around Rs 7,400 crores. However, in 2018, the State government consciously opted to implement Phase II as a State sector scheme, meaning the entire project cost will be borne by the State,” she said, reports The Hindu.

The Finance Minister also mentioned that the Centre would provide some subordinate financial support. “The Department of Economic Affairs is actively helping the State secure international loans, with Rs 32,000 crores already arranged for the project. However, the State government has not utilised even Rs 6,000 crores of this amount,” Sitharaman remarked.

In response to concerns about the state government’s fiscal capacity, Sitharaman acknowledged that large-scale infrastructure projects could strain Tamil Nadu’s borrowing limits under the Fiscal Responsibility and Budget Management (FRBM) Act. “This is why many metro rail projects in the country are funded by the Centre,” she added.