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The Telangana government has formally agreed to take full control of Phase 1 of the Hyderabad Metro Rail, which can be seen as a setback for the world’s largest PPP in metro project. Under the agreement, the government will take on liabilities of around Rs. 13,000 crore and will pay Larsen & Toubro Ltd. (L&T) a one-time settlement of Rs. 2,000 crore for its equity investment in L&T Metro Rail Hyderabad Limited (LTMRHL).
The settlement was finalised following discussions between Telangana Chief Minister A Revanth Reddy and L&T’s CMD SN Subrahmanyan. Initially, L&T had proposed that the government assume the entire debt and pay an additional Rs 5,900 crore for equity. The final negotiation brought the equity payout down to Rs 2,000 crore, balancing public interest with the need to expedite the metro’s Phase 2 expansion.
This move comes as Hyderabad seeks to expand its metro network, which has fallen from second position nationally in 2014 to ninth in metro length today. The state government has proposed eight new metro lines under Phase 2A and 2B, adding approximately 163 km to the city’s existing network. The expansion is essential to meet growing public transport demand and enhance connectivity across Hyderabad.
L&T cited strategic reasons for its exit, noting that it is moving away from transportation concession asset ownership and operations. The company confirmed it could not serve as an equity partner in Phase 2, which opened the way for full state control of Phase 1.
The Centre had earlier raised concerns about operational integration between the privately developed Phase 1 and the government-managed Phase 2. The Government of India stressed the need for a Definitive Agreement to ensure seamless operations and clear revenue and cost-sharing mechanisms. L&T had considered participating in Phase 2 as a joint venture partner but ultimately chose to exit due to unresolved operational and financial integration concerns.
During negotiations, Chief Minister Revanth Reddy emphasized the state’s preference for L&T’s continued participation in Phase 2. However, Subrahmanyan reiterated L&T’s decision to divest from transportation concession businesses entirely. This agreement now allows the Telangana government to proceed with metro expansion while maintaining continuity in train operations.
The final settlement also accounted for prior agreements, including the July 22, 2022 Supplementary Concession Agreement, under which Rs 2,100 crore remains due from the state out of a previously agreed Rs 3,000 crore interest-free loan. By resolving these financial matters, the state has cleared a major roadblock for Phase 2 approvals from the Government of India.
With this divestment, the Telangana government can now move swiftly to implement Phase 2A and 2B expansions. The new network will link previously underserved areas and improve the overall efficiency of Hyderabad’s public transport system. Operational control by the state also ensures that fare structures, schedules, and revenue sharing are directly managed, simplifying decision-making and accountability.
The Hyderabad Metro, under full government oversight, is expected to benefit from quicker decision-making, smoother coordination with urban planning authorities, and better integration with other transport systems. Analysts suggest this move could serve as a model for other Indian cities where private-public partnerships in metro projects face operational or financial challenges.
L&T’s exit and Telangana government’s takeover mark a pivotal moment for Hyderabad Metro. By assuming debt and settling equity, the state has positioned itself to expedite Phase 2 construction, improve operational integration, and provide a modern, efficient transport solution for the city’s rapidly growing population.
