Hyderabad Metro Rail project has become an unlikely political hot potato amid the heat and dust of the Parliament polls, with L&T claiming that the free bus travel scheme has led to a decline in metro rail ridership.
It is not the first time that L&T has talked about selling off stake in L&T Metro Rail Hyderabad (L&TMRH), the firm which has built and runs the metro rail operations for over 69.2 km across three corridors. It has gone public about getting out of the “non-core” business repeatedly. Yet, the ‘political’ statement in attributing the free bus travel scheme for women across Telangana to a ‘fall’ in metro rail ridership in the capital has got the government’s goat.
“Passenger fare revenue constitutes about 50-60% and ridership has been on the rise with close to 5 lakh passengers. The demand is for increasing the number of coaches and trips which it had failed to address. A proposal to get four three-coach train sets from Nagpur Metro was put on the backburner citing losses. The losses are due to a huge debt burden with high interest rates and not operational losses,” informed top government officials, pleading anonymity.
Every quarter, the company is reported to be making about ₹300-crore loss with a debt burden of about ₹8,000 crore. It has put a cost overrun of ₹3,756 crore due to various delays and the COVID shutdown, of which about ₹900 crore was provided by the government as “interest free soft loan” in various tranches, they disclosed.
Figures tell a tale. In 2017-18 fiscal when the operations began, L&TMRH declared a loss of ₹58.36 crore against a revenue of ₹69.53 crore. In 2018-19, loss escalated to ₹148 crore against a revenue of ₹318.46, and in 2019-20, it was ₹382 crore against ₹598.20 crore. The year 2020-21, during the pandemic, saw a loss of ₹1,766 crore against a revenue of ₹227.95 crore.
Losses remained high in subsequent years, with ₹1,745 crore against ₹475.37 crore in 2021-22 and ₹1,315.95 crore against ₹703.20 crore in 2022-23 with revenue from fare collection being ₹500 crore. Ridership has increased from 4.08 lakh to 4.41 lakh daily and it has been hovering between 4.7 lakh-4.9 lakh generally.
Metro Rail projects are generally loss-making and are built all over the world by governments for the sustenance of the cities. HMR in a way is a unique project under public-private partnership mode and to make it financially viable, the government had allowed property development on some parcels of 269 acres of prime land given for depots and parking areas at some stations.
L&TMRH has built four malls of about 1.8 million square feet as against the original plan to have six million square feet by now of the 18.5 million square feet it is entitled to build. It has however ‘sold’ its concessional rights on 15 acres at Raidurg for about ₹1,200 crore and is trying to monetise the built-up malls and some more land parcels to reduce the debt burden.
“It can divest or sell its equity but who will buy it at this stage? They are harming themselves by making negative statements about their own project. L&T officials were internally told to avoid making political statements, but they have crossed all limits this time,” said a top government official.
“It’s a catch-22 situation. No government can afford to be seen capitulating to corporate interests. At the same time, L&TMRH cannot abandon the project or sell it, unless it is profitable. For that, they have to increase services and footfall, which means capital investment. It is unlikely that the promised government financial assistance will fructify after the latest public spat,” the official added.
