Union Govt withheld money due to Hyderabad Metro for violation of guidelines
The pending money that the Union Government owes Hyderabad Metro has been withheld because of the revision of fares by Hyderabad Metro— which is a violation of the Viability Gap Funding (VGF) guidelines by Hyderabad Metro. Out of the total sanctioned Rs 1,458 crore only Rs 1,204 crore has been released so far to Hyderabad Metro and Rs 254 crore has been withheld. The reason for not having revealed the funding has been revealed in a report on the ‘Implementation of Metro Rail Projects’ submitted by the Standing Committee on Housing and Urban Affairs on July 19.
Earlier, it wasn’t clear whether the Union Government had withheld this amount for not having completed the extension of the metro line from MGBS until Falaknuma or due to fare revision that the Hyderabad Metro had undertaken. TNM reached out to NVS Reddy, Hyderabad Metro Rail MD for a reaction. “The matter is being discussed by the concerned ministries under the Government of India. Hence, I can’t comment or clarify at this stage,” Reddy said.
The actual project cost was Rs.18,411 crore. Out of the total, Rs 1204 crore was released as VGF by the Government of India and Rs 17,207 crore by L&T Metro Rail (Hyderabad) Limited (L&TMRHL). The Committee noted in the report that out of the total VGF sanctioned grant Rs 254 crore has been withheld. The report said that this was due to violation of VGF guidelines by Hyderabad Metro.
“However, the Committee has been apprised that Hyderabad Metro initially began under the AP Tramways Act and later on, it came under the Central Metro Act which permitted revision of fares. Accordingly, Hyderabad metro revised its fares,” noted the report.
Hyderabad Metro is the world’s largest Metro Rail project in Public Private Partnership (PPP) mode and around 90% of the project cost has been financed by the private sector. This is a first for a Metro project of this magnitude. This project was undertaken by the Government of Telangana under the PPP model of funding through the Viability Gap Funding (VGF) scheme of the Union Government. Under the VGF scheme, a grant is provided to projects that are economically justified but not financially viable.
The Hyderabad Metro’s revenues plummeted due to COVID-19 pandemic during 2020-2021. The Hyderabad Metro has been recording a very low ridership, way below the average daily ridership of 19 lakh required for break even. The report revealed that the Hyderabad Metro suffered a loss of Rs 1,767 crore in 2020-2021 and a cumulative loss of Rs 3,279 crore. A huge debt of Rs 13,252 crore and a high interest burden of 9.1% are main reasons for the rising losses. Generally, government projects have only an interest rate of 2%. The interest burden is coming to about Rs 1,200 crore per annum.
The Hyderabad Metro has submitted a request to the Ministry of Finance (MoF) for release of the balance Rs 254 crore which is under consideration. “Looking at the huge loss that Hyderabad Metro is incurring, the Committee desires that the VGF issue is resolved at the earliest by DEA, MoF,” the report said.