L&T sells Metro Phase-1 to Telangana govt, refuses to partner in Phase-2
In an official statement, it was announced that L&T will divest their complete stake in Phase-1 metro to the State government
By Kaniza Garari
Hyderabad: In a most unexpected move, the Telangana State government will now be the owner of the Metro Rail Project in Hyderabad, which is deemed to be one of the biggest and costliest private-run projects in the city.
The possible takeover of the ownership from L&T Metro Rail Hyderabad Limited (L&TMRHL) is intended to hasten the Government of India’s (GoI) approval of Phase-2 of the metro development.
In an official statement, it was announced that L&T will divest their complete stake in Phase-1 metro to the State government. This makes the State Government the sole entity of Metro Phase-1.
With this move, the Telangana government is set to take over the complete debt of LTMRHL and pay about Rs 5,900 crores for its equity value.
What is the sequence of events that led to the takeover?
Hyderabad, which was ranked second in the nation in 2014 for metro rail network length, is currently ranked ninth.
To cater to the growing demand of public transport in Hyderabad and surrounding areas, the Government of Telangana has submitted proposals for the sanction of eight lines as part of Phase 2A and 2B expansion, totalling about 163 km of additional metro network.
The Government of India has held multiple meetings to review the proposals.
What is the government’s concern?
The primary concern expressed by the Government of India is that the proposed Metro Phase-2 is being executed by a government agency, while the Phase-1 Metro in Hyderabad is a private entity. It insisted on a definitive agreement with L&T for the operational integration of Phase-1 with the proposed Phase-2 to process the proposal further.
The Government of India has also requested L&T Metro to participate in the Phase-2 project as a joint venture of the GoI and the GoTG.
L&T asked to stay back as an equity partner, but the company backed out
However, L&T has conveyed that they will neither be able to participate in phase 2A and phase 2B as an equity partner nor sign a definitive agreement. They expressed their willingness to offer their equity stake in LTMRHL to the State or the Central government.
In this regard, CM A Revanth Reddy and top government officials met with L&T group CMD SN Subrahmanyan and senior L&T officers on Thursday to discuss the next steps in an effort to end the impasse that has existed since November 2024.
Earlier in discussions held between the State government and L&T, the Chief Minister informed L&T chairman that the State government would prefer that L&T participate in the Phase-2 expansion of the metro as an equity partner.
However, the L&T CMD reiterated that the company will not be able to participate in Phase-2 metro project as an equity partner since it has exited the business of owning and operating transportation concession assets.
Then, the CM requested L&T to sign a ‘definitive agreement’ for operational integration of Phase 1 and Phase 2 corridors, which would also incorporate the revenue and cost sharing mechanisms, etc., as insisted upon by the Government of India. L&T has said about this arrangement.
What are the concerns of L&T?
The L&T CMD 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.
Subrahmanyam from L&T said that the State government has been asked to take over the complete debt of LTMRHL and pay about Rs 5,900 crores for their equity value.
State yet to pay Rs 2,100 crores, says L&T
During negotiations with the government, Subrahmanyam 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 crores to L&T out of the agreed Rs 3,000 crores as an interest-free loan.
An official statement from the government said, “After detailed negotiations, L&T and the State government have agreed in principle that the State government would take over the Phase-I Metro Rail project by taking over the debt of the project, which now stands at about Rs 13,000 crore.”
“Further, the State government will pay about Rs 2,000 crore to L&T towards their equity investment in LTMRHL as a one-time settlement. 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,” the statement said.
