The Hyderabad Metro Rail PPP (public private partnership) project, once a model infrastructure initiative, is now facing major financial and operational stress. Concessionaire Larsen & Toubro (L&T) has formally expressed its desire to exit, citing mounting losses, increasing debt, and lack of sufficient government support.
What’s Going On
- L&T has sent letters to both the Telangana government and the Central government proposing that its equity stake (over 90%) in the metro project especially Phase I be taken over by either government through a Special Purpose Vehicle (SPV).
- The firm has flagged that the proposed Phase II expansion (Phase II-A and II-B) could further increase operational complications and financial burden unless better structures are put in place.
Financial Challenges
- Losses have already crossed ₹ 6,000 ₹ 6,600 crore, driven primarily by cost overruns, high interest on debt, and delays caused by land acquisition, utility shifting, right of way issues, and changing alignments.
- Revenue declined in FY 2024-25 to about ₹1,108.54 crore, down from ₹1,399.31 crore in the previous year a drop of 21%. Meanwhile, losses before and after tax increased.
- Debt servicing is cited as a major burden: large loan amounts at steep interest rates, coupled with lower ridership (especially since COVID-19 and changed commuting patterns), have made the financial model unsustainable under the current terms.
Operational & Integration Concerns
- L&T has warned that mixing operations of Phase I and Phase II under the same PPP model could lead to fare and revenue sharing conflicts, logistical complications, and inconsistencies in commuter experience.
- Operational disruptions during the pandemic, including service suspensions, contributed to revenue loss. Changes in travel behaviour, work from home, and reduced ridership have persisted.
State Govt’s Role & Reactions
- In response to L&T’s request, the state has considered options like taking over equity, restructuring operation models, or forming an SPV to integrate both phases.
- There has also been administrative reshuffling: the Managing Director (MD) of Hyderabad Metro Rail Limited (HMRL), NVS Reddy, was replaced recently, with new oversight as tensions mount.
What Comes Next
- Whether the government will agree to purchase L&T’s stake or accept an SPV takeover.
- How Phase II will be managed whether under PPP or through full government control.
- Measures to reduce cost overruns, streamline operations, and improve financial viability if L&T continues.
Why It Matters
- Hyderabad Metro is a key transport backbone for the city, with over several lakh commuters depending on it daily. Disruption or exit by the private partner could affect fare stability, maintenance, and service frequency.
- The situation tests the sustainability of large infrastructure projects under PPP, especially in public transport where ridership, tariff rates, and governmental policy shifts (like free or subsidized travel) have big impacts.
