Hyderabad Metro Phase II expansion hinges on Centre-State joint venture

Telangana's plan to expand the Hyderabad Metro Rail network and take over the existing Phase I system is awaiting clearances from the Union government, with Chief Minister A. Revanth Reddy making a fresh push in New Delhi for the proposal's approval.

The Phase II network, spanning 122.9 km, is estimated to cost ₹38,595 crore and is proposed to be implemented through a Centre-State joint venture with equal equity participation. The state also wants to acquire the 69.2-km Phase I network from L&T Metro Rail Hyderabad Ltd.

The proposal has been held up by a combination of financial, regulatory and administrative requirements that need multiple central approvals. Officials say low-interest funding for the acquisition and the expansion cannot be accessed without these clearances, as provisions under the Railway Act and the Metro Rail Act require central involvement at various stages.

Safety certification for metro systems, even those developed by states, is issued by the Commissioner of Metro Rail Safety under the Ministry of Civil Aviation, with the officer generally drawn from railway engineering services, a senior official explained.

SBI Capital Markets, engaged by the state government, is exploring the possibility of securing a soft loan of about ₹13,500 crore through entities operating from Gujarat's GIFT City. This is Telangana's second attempt to arrange financing for the takeover. An earlier proposal for a ₹13,527-crore loan from the Indian Railway Finance Corporation collapsed after the Ministry of Railways pointed out that IRFC's mandate is limited to financing new infrastructure rather than refinancing existing assets. Officials acknowledge it remains unclear how this limitation was missed in earlier discussions.

A possible breakthrough emerged after a June meeting between Mr. Reddy and Union Ministers Ashwini Vaishnaw, G. Kishan Reddy and Manohar Lal Khattar, which produced a roadmap to resolve the impasse. The proposed approach involves appointing SBI Caps to identify a lender for a soft loan to be serviced by the government rather than HMR, merging Hyderabad Metro Rail with Hyderabad Airport Metro Limited, and the Centre acquiring a 50% stake in the unified entity.

It is still unclear whether all central ministries have formally approved the funding model. HMR authorities express confidence, citing clearances from the Reserve Bank of India and statutory assurances for the borrowing plan.

The government is prepared to release its equity contribution of ₹1,462 crore to L&T, based on valuations by IDBI Capital and DMRC International, once the loan is secured and if SBI Caps is in agreement with the valuation. Efforts are also under way to procure 60 additional coaches for the existing network, which would require statutory clearances from agencies including the Research Designs and Standards Organisation and the CMRS.