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Recent meetings in Delhi between Telangana Chief Minister A. Revanth Reddy and Union ministers Ashwini Vaishnaw, Manohar Lal Khattar, and G. Kishan Reddy have helped end the long-standing dispute between the Centre and the Telangana government over funding the Hyderabad Metro Rail project.
Hyderabad Metro Phase I
The first phase of the Hyderabad Metro was built by L&T under what was then the world's largest public-private partnership (PPP) project. However, after Telangana was formed in 2014, the state government asked for changes to the metro routes. This delayed the project for several years and increased its cost from the original estimate of ₹15,000 crore to around ₹22,000 crore. Due to rising costs and lower returns, L&T reportedly suffered annual losses of nearly ₹400 crore.
Due to these financial problems, L&T decided not to participate in the second phase of the metro. The Telangana government later agreed to take over the project after discussions with the Centre and the company. However, another challenge arose when the expected loan from the Indian Railway Finance Corporation (IRFC) was not approved. This led to disagreements between the state and the Centre. The situation has now changed. Earlier agreements have been cancelled, and SBI Capital Markets has been appointed to study the first phase again and prepare a plan for the second phase.
A major concern now is whether the Telangana government will have to bear the full cost of taking over the first phase. The state has already approached the IRFC for financial support. Meanwhile, the second phase will be developed as a joint venture between the Centre and the state government. The expansion plan includes adding 122 km of new metro lines to the existing 69 km network.
Hyderabad Metro First & Second Phases to be Managed by the Centre & State
Many experts believe it would be better if both the first phase and the upcoming second phase are managed together by the Centre and the state through a special purpose vehicle. They also suggest that the Centre should contribute to the cost of acquiring the first phase.
The Hyderabad Metro experience shows that large public-private partnership projects can face major challenges in India. It also highlights the importance of avoiding delays and changes in project plans, as these can significantly increase costs and create financial difficulties.