From 1 May onwards, the Telangana government will operate the Hyderabad Metro Rail, as the takeover process was completed two days ago. L&T Metro Rail (Hyderabad) Ltd (LTMRHL), a subsidiary of Larsen & Toubro, has transferred 90 per cent of its share for the payment of Rs 1,461.47 crore and a debt of Rs 13,538 crore. The government is not requiring L&T to repay the existing soft loan of Rs 366.93 crore. This move ends L&T’s long involvement in one of India’s largest Public-Private Partnership (PPP) metro projects and paves the way for the expansion of the Hyderabad Metro Rail (HMR).
The Metro rail project was originally awarded to Maytas Metro in 2008 in undivided Andhra Pradesh. The contract was cancelled in 2009 after the company failed to achieve financial closure. In a fresh bidding round in 2010, L&T emerged as the successful bidder and was awarded the 69-km project in September 2010 under the design-build-finance-operate-transfer model. The L&T created a special-purpose vehicle, LTMRHL, and signed a 35-year concession agreement with the then state government. While L&T held a 90 per cent share, the Telangana government held the remaining 10 per cent.
The HMR started the commercial operations in 2020. The company chose elevated tracks rather than underground lines due to the city's rocky terrain. Gleaming elevated tracks, modern stations and air-conditioned coaches quickly became a symbol of the city’s growth, serving around 4.5 lakh passengers daily. However, despite its apparent success, HMR Ltd.'s financial condition deteriorated. The Covid-19 caused major disruption, and the company had to suspend operations for 169 days, resulting in losses of Rs 1,766.74 crore. The number of passengers has been hovering around 4.5 lakh per day. The company projected 40 per cent of income from ticket sales and 60 per cent from economic activity, such as shop leases. However, 60 per cent of the income still comes from ticket sales.
The company has posted a loss of Rs 625.88 crore in FY 2024-25. Although the company requested government support, it never materialised. L&T ultimately stated it could not sustain operations due to mounting losses. The final trigger for the handover was the urgent need to expand the metro network. The Telangana government is keen to roll out Phase 2 corridors, especially to cover underserved areas such as the IT corridor and the Old City. However, the central government made it clear that approvals and funding for Phase 2 would be smoother with a single integrated operator managing both phases. Operating Phase 1 privately and Phase 2 under government control would create complications in scheduling, ticketing, revenue sharing and day-to-day operations.
Faced with mounting losses and reluctance to take on integration risks for Phase 2, L&T chose to exit. The state government, on the other hand, viewed the takeover as essential to unlock future expansion and present a unified metro system to secure central funding. Under the deal, the government acquires full ownership and plans to refinance the existing debt. L&T receives relief from ongoing losses and contingent liabilities, allowing it to redirect capital to its core engineering and construction businesses. For Hyderabad commuters, daily services are expected to continue smoothly during the transition, with hopes of improved integration and eventual network growth.
The Telangana government wants to turn around the loss-making Hyderabad Metro by significantly reducing debt costs and taking other measures. By refinancing the existing high-interest debt of Rs. 13,538.53 crore (8-10 per cent) with a long-term, low-cost loan of Rs. 13,615 crore (3-4 per cent) from the Indian Railway Finance Corporation over 20 years, the annual interest burden is expected to drop sharply. The government also seeks to boost non-fare revenue through aggressive commercial development at stations, transit-oriented development and better monetisation of land and retail spaces. It is also working on integrated feeder services. The government further believes that running an efficient urban rapid transport system that could serve hundreds of thousands of people on high-demand routes is a public good that cannot be ignored.
However, not everyone approves of the government's line of thinking. Donti Narsimha Reddy, an urban management specialist, questioned the government’s maths. Already, the government will be burdened by about Rs 15,000 crore and will have to raise more loans to finance the next phase of expansions. It could take more than six decades to cover these losses. “Unless the government has a sound plan, we will be looking at decades of financial losses, and any future disruptions could only compound the problem,” he explained.
Having decided to take over the operations of Hyderabad Metro Rail, the Telangana government is pushing for expansion of the network. The government has submitted a comprehensive proposal to the Centre for developing 162 km of new metro lines across eight corridors, under phases 2A and 2B. The Phase 2A (76.4 km across five corridors) covers critical routes such as Nagole to Shamshabad Airport (36.8 km), Raidurg to Kokapet, Mahatma Gandhi Bus Station to Chandrayangutta (Old City), Miyapur to Patancheru and LB Nagar to Hayathnagar. Phase 2B (86.1 km across three corridors) focuses on new growth areas, with lines connecting the Airport to Bharat Future City (39.6 km), Jubilee Bus Stand to Medchal (24 km), and Jubilee Bus Stand to Shamirpet (22 km). The government aims to execute these as a joint venture with the central government on a 50:50 cost-sharing basis and expects faster approvals and funding now that a single public operator is in place. Once completed, the expanded network is expected to significantly improve connectivity to the airport, industrial zones, emerging residential areas, and the proposed Future City.
