Hyderabad Metro: Telangana Government To Provide Rs 3,000 Crores Loan To Help L&T Recover Losses And Pare Debts

L&T Hyderabad Metro Rail Limited (L&THMRL) is set to receive a soft loan of Rs 3000 crores from the Telangana government and go ahead for monetising land parcels totalling 260 acres that is a part of the metro project.

The move will likely come as big relief to the loss-making and debt-laden subsidiary of infrastructure and engineering behemoth L&T. The company requested a soft loan by invoking a force majeure clause (which provides for waiver of damages).

The Rs 3,000 crore loan will likely be disbursed in tranches, including an immediate relief of Rs 1000 crore.

L&THMRL has a debt of nearly Rs 13,000 crore. L&T hopes to reduce the debt level to around Rs 8,000 crore in the near term by monetising land parcels that are part of the metro project. Under the concessionaire agreement, L&THMRL has a concession period of 35 years for the project with an option to be extended.

In September 2008, the Andhra Pradesh government decided to award the Hyderabad Metro Rail project in Public Private Partnership (PPP) mode on a Design, Build, Finance, Operate and Transfer (DBFOT) basis to a consortium of two real estate companies, Navbharat, and Maytas Metro Limited (MML). However with Satyam Computer, the parent company of Maytas embroiled in a huge financial scandal resulting in its implosion, the contract with the consortium was cancelled.

The metro project was subsequently awarded to L&THMRL in early 2012, with Union Government sanctioning Rs.1,458 crores as a one-time capital grant. L&THMRL invested the remaining Rs.12,674 crores. The proposed metro system was envisaged to cover three high-density traffic corridors of the city spanning over 72 km.

The work on the project started in June 2012. The project execution was delayed due to the right-of-way issues and other challenges, including the absence of a comprehensive underground map of utilities, the absence of standardisation of technical specifications and the lengthy procedure for approval. This resulted in cost escalation.

When the project commenced in 2012, the cost was estimated at Rs 14,132 crores but ended up costing Rs 21,000 crores when it was finally completed in February 2020.

Due to the tepid adoption of the system, the revenues generated from the project did not match the initial projection.

Covid-19 pandemic-induced disruption to mobility exacerbated the company's problem. L&THMRL is still counting on improved passenger traffic on the Hyderabad Metro as people return to work. From 150,000 passengers a year ago, the daily average number of passengers taking the metro in Hyderabad has increased to around 450,000.

The loss-making metro project also caused a considerable dent in the overall financial performance of the parent company L&T. This prompted the company to consider reducing its stake in the metro venture from 100 per cent to 51 per cent in the project by infusing Rs 4,000 crores of equity from external investors. However, with the company set to receive a soft loan from the government, it could delay the disinvestment plan.

The company may also agree to complete the leftover 5 km stretch between Mahatma Gandhi Bus Station Station and Falaknuma, part of the Jubilee Bus Station-Falaknuma corridor. Work on MGBS – Falaknuma section of the Green Line could never begin due to local protests in the Old City, which led to Phase 1 getting truncated at 67 km.

Hyderabad Metro comprises 3 Operational Lines covering 67 km and 59 stations.

• Line-1 – Red Line – Miyapur – L B Nagar (29.87 km, 27 stations)

• Line-2 – Green Line – JBS Parade Ground – MGBS (9.6 km, nine stations)

• Line-3 – Blue Line – Nagole – Raidurg (28 km, 23 stations).