Hyderabad Metro Rail Project Runs Into Trouble, L&T Wants To Exit

Hyderabad's Metro Rail project has run into rough weather. Infrastructure giant Larsen & Toubro (L&T) has formally requested to exit the Hyderabad Metro Rail project, citing massive financial losses and a lack of support from the Telangana government.

The company, which is the majority stakeholder in the Public-Private Partnership (PPP), has offered to sell its equity to either the state or central government.

The company's decision, outlined in a letter sent to the Ministry of Housing and Urban Affairs and the Telangana government, comes amid mounting losses, which L&T estimates to be between Rs 6,000-6,600 crore.

These losses are primarily attributed to cost overruns and the significant debt burden from the project's construction. The company also pointed to the financial impact of the COVID-19 pandemic, which led to a suspension of services for over five months and a subsequent drop in ridership.

L&T's letter details a strained relationship with the state government, noting that despite repeated requests, no financial assistance has been provided to help alleviate the fiscal stress.

The company's claims date back to March 2017, when it first requested Rs 3,756 crore for cost overruns and delays, a figure which has since grown.

The company also expressed its unwillingness to participate in the state's ambitious Phase-II expansion under the existing PPP model. The proposed expansion would see new lines integrated with the current network, and L&T has warned that this could create significant operational and financial challenges.

The firm has argued that having two separate entities managing Phase-I and Phase-II would lead to complications in ticket pricing, train operations, and the sharing of revenue and costs, making it difficult to provide a seamless experience for commuters.

To resolve the situation, L&T has proposed a solution: the formation of a new Special Purpose Vehicle (SPV). The company has offered to sell its equity stake in the project to the new SPV, which would be owned and operated by either the central or Telangana government.

This would allow a single entity to take over the operations and maintenance of both the existing Phase-I and the upcoming Phase-II lines, ensuring a unified and more efficient metro system.

The Telangana government, which owns the remaining 10% stake in the project, has yet to officially respond to the letter. This development has cast uncertainty over the future of the Hyderabad Metro Rail, once hailed as a model for PPP infrastructure projects in India.

As of late 2024 and early 2025, the Hyderabad Metro carries an average of around 4.75 lakh passengers daily, though ridership has recently seen a slight drop from a peak of 5.63 lakh in August 2024 to just under 4.5 lakh.

The metro system operates on three main lines - Red, Green, and Blue - which collectively span a length of 69.2 kilometers. This network, the largest metro project under a Public-Private Partnership (PPP) model, is a vital part of the city's transport infrastructure.