Central Government Stops Funding for Hyderabad Metro

Hyderabad Metro Rail inaugurated the new service between Ameerpet and LB Nagar the other day finishing the First Corridor. But as soon as that is completed, there is a shocker for the State Government and concessionaire, L&T. The Finance Ministry declined further release of viability gap funding for the Project.

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The Finance Ministry has said that under the Metro Act, further viability gap funding could not be provided as the concessionaire had raised the fares and thus needed no additional support. L&T, however, says that there is no release between Viability Gap Funding and the new Metro Act as it is a previous contractual issue.

L&T also tried to argue that the cost of inputs had significantly risen and the fare hike did not fully compensate this but the Finance Ministry did not buy the argument. The capital structure of the project comprises 11,478 crores in term loans, Rs 3,439 crore in equity and 1,458 crores as viability gap funding from the Central government.

Till the end of March, 1,204 crores had been received in viability gap funding which means 254 crores are yet to be received on that account. The second tranche of VGF amounting to 117 crores has 273 Crores of debt attached to it which again will be released only after the second VGF is credited. In all, 847 crores of funds are tied as of now to the finance ministry’s decision.