The Union government has withheld a loan of ₹13,527 crore granted by the Indian Railway Finance Corporation (IRFC) for refinancing the existing debt of Hyderabad Metro Rail Limited (HMRL) and facilitating the Telangana government's takeover of the project. The loan agreement was signed on May 25 and publicly announced the next day. The loan amount that was supposed to be disbursed by June 15 is now effectively shelved due to the Centre's insistence on changes to repayment and disbursement conditions in an already signed loan agreement. Telangana has already paid ₹84.32 crore as an upfront fee for the loan, and it was supposed to receive the loan amount by now.
For the background of the issue, the Telangana government decided to take over L&T Metro Rail (Hyderabad) Ltd. (LTMRHL), the concessionaire operating Hyderabad Metro Phase-I, to expand the current 69.2-km network. The proposed Phase-II expansion covers approximately 76.4 km and includes the airport, Old City, Patancheru and Hayathnagar corridors. The state government thought that the takeover would facilitate integration with the proposed Phase-II expansion and airport connectivity projects. While the Centre insisted on an integration framework between Phase I and Phase II, there is no public evidence that it explicitly directed Telangana to take over L&T. To ensure operational ease, the Telangana government decided to take over the project from LTMRHL by acquiring L&T's equity stake ₹Rs 1,461 crore and refinancing its existing debt of about ₹13,536 crore.
In this process, refinancing the existing, costly debts emerged as the government's top priority. The state government availed the IRFC loan of ₹13,527 crore for the same purpose. State officials have said the restructuring will reduce financial pressure on the project and improve its long-term viability. The takeover also gives the government control over metro-related land parcels and development rights associated with stations, depots and commercial properties. These assets are expected to support future revenue generation and urban development initiatives.
However, the Centre, which initially seemed cooperative, has turned hostile and insisted that the IRFC should have first charge on the income, and the remaining amount shall be used for operations and maintenance costs. Telangana officials argue that the Centre’s new interpretation of “first charge” in the concluded agreement was unnecessary, as they have already provided sufficient and absolute credit guarantees. The state is supposed to repay the amount over a 20-year period, and the state has already provided unconditional and absolute credit repayment guarantees, according to Telangana chief secretary K. Ramakrishna Rao.
As the Centre has withheld the loan, Chief Minister Revanth Reddy upped his attacks on the Centre, especially Union Coal and Mines Minister G. Kishan Reddy. The Chief Minister said the IRFC loan disbursement was stalled due to the advice of Kishan Reddy. Responding to the criticism, Kishan Reddy held a press meet in New Delhi and said the state government was not ready to incorporate changes suggested by the Union Ministry of Housing and Urban Affairs regarding repayment and revenue-priority arrangements. He said the state government should talk to the ministry and obtain the required no-objection clearance. Kishan Reddy also said that despite Revanth Reddy meeting Union urban affairs minister Manohar Lal Khattar, the state government was unwilling to include the changes sought by the Centre.
Despite Kishan Reddy’s claim, his suggestion was that the IRFC decide how to utilise Hyderabad Metro income. The IRFC and Hyderabad Metro could decide how much income shall be used for debt servicing and how much could go for O&M expenses. However, many interpret this as micromanagement and believe there was no need for it as long as the Telangana government honours its repayment obligations. The costs of loan disbursement delay are financially damaging. The Chief Minister, on June 21, declared that the Hyderabad Metro is already bearing a burden of Rs. 2.5 crore per day and about Rs 1,000 crore per annum; and insisted that the Centre must let the state follow its own plan.
While leaving for New Delhi on June 21, the CM challenged the Telangana BJP leaders to secure him an appointment with Railway Minister Ashwini Vaishnaw to discuss the IRFC loan disbursement issue. He also declared that if the Centre does not cooperate, the state government will go solo on the Hyderabad Metro project. However, Telangana BJP president N. Ramchander Rao responded sarcastically. Rao sought an appointment with Rahul Gandhi to discuss whether the Congress government had implemented its "six guarantees" promised during the 2023 Assembly election campaign.
The open clash and public demand indicate a likely breakdown of trust between the state and the Centre. The Centre has made its stand clear on the IRFC loan disbursement issue: if the state government does not agree to its conditions, cooperation may not be forthcoming. Though Revanth Reddy has announced his intention to chart his own path, it may not be easy for the state government to arrange funds on the scale of the IRFC loan.
The Centre's adamant stand is highly questionable. Why doesn't it allow a state government to implement its financial ideas? If the Centre had concerns about the proposed repayment structure and revenue-priority arrangements, why were these concerns not fully resolved before the loan agreement was signed on May 25? The withholding of a loan whose agreement has already been signed raises serious questions about Centre-State coordination and the timing of objections to disbursement conditions. Whatever the technical justification, the delay does little to advance Telangana's infrastructure development.
