The Telangana government will take over Phase I of Hyderabad Metro as L&T has decided to divest their complete stake in the project.
The state government on Thursday agreed in principle to take over the Phase-I Metro Rail project by taking over the debt of about Rs 13,000 crore.
The state government will also pay about Rs 2,000 crore to L&T towards their equity investment in L&T Metro Rail Hyderabad Limited (LTMRHL) as a one-time settlement.
The decision was taken at a meeting that Chief Minister A. Revanth Reddy had with L&T Group CMD S.N. Subrahmanyan here.
Subrahmanyam suggested that the state government take over the complete debt of LTMRHL and pay about Rs 5,900 crore for its equity value.
He also pointed out that, as per the Supplementary Concession Agreement signed on July 22, 2022, the state government is yet to pay Rs. 2,100 crore to L&T out of the agreed Rs 3,000 crore as an interest-free loan.
The state government said that it decided to take over Phase I to expedite the approval of proposed Phase II by the Central government.
The conditions of the takeover shall be worked out with mutual discussions, and the process will be carried forward in a carefully calibrated and mutually agreeable manner, duly ensuring all legal and statutory compliances, a Hyderabad Metro Rail Limited (HMRL) statement said.
To cater to the growing demand of public transport in Hyderabad and surrounding areas, the state government submitted proposals to the Centre for sanction of 8 lines as part of Phase IIA & IIB, totalling about 163km of additional metro network.
The primary concern expressed by the Centre is that the proposed Phase II is being executed by a government agency, while Phase I was executed by a private entity, and it insisted on a definitive agreement with L&T for operational integration of Phase I with the proposed Phase II to process the proposal further.
The Centre had also requested L&T Metro to participate in the Phase II project as a joint venture of the Centre and the Telangana government. However, L&T conveyed regret that they will neither be able to participate in Phase II A and Phase IIB as equity partner nor sign the definitive agreement and expressed their willingness to offer their equity stake in LTMRHL to the state or Central government.
To break the deadlock existing since November 2024, Chief Minister Revanth Reddy, along with senior officers of the government, held a meeting with L&T Group CMD Subrahmanyan and senior L&T officers.
The Chief Minister told the Chairman of L&T that the state government would prefer that L&T participate in the Phase II expansion of the metro as an equity partner. However, Subrahmanyan reiterated that L&T will not be able to participate in Phase II of the metro project as an equity partner since it has exited the business of owning and operating transportation concession assets.
The Chief Minister requested L&T to sign a "definitive agreement" for operational integration of Phase I and Phase II corridors, which would also incorporate the revenue and cost sharing mechanisms, etc., as insisted upon by the Centre, in order to process the proposal of Phase II further.
To this, CMD L&T informed that they are unable to sign the definitive agreement as they have 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 their complete stake in Phase I metro to the state government, which will make Phase I a state government entity. Therefore, discussions were held on financials, asset valuation, etc., of the Phase-I project.