Hyderabad: A day after the state government announced its intent to take over the operations of Hyderabad Metro Rail from concessionaire L&T Metro to fast-track its plans for metro expansion in the city, Chief Minister A. Revanth Reddy-led Congress government found itself in a precarious situation over funding the Rs 15,000-crore takeover deal.
According to the deal announced on Thursday, L&T Metro will exit the operations of Hyderabad Metro following the state government’s take over of its Rs 13,000-crore debt and buying back of its Rs 2,000-crore equity stake.
However, the central government’s regulations stipulate that any loan directly or indirectly raised by the state, or extended to corporations with government guarantees will fall under the Fiscal Responsibility and Budget Management (FRBM) limits. Only then can the Centre consider the state’s proposals for Phase-2A and Phase-2B expansion, which must integrate seamlessly with Phase-1 operations.
After six months into the fiscal year 2025-26, the state government had headroom to raise barely Rs 8,000 crore and finding funds for Rs 15,000 crore within the existing ceiling has become nearly impossible.
Official sources in the finance department said that Chief Minister A. Revanth Reddy was expected to approach Union finance minister Nirmala Sitharaman in Delhi seeking exemption from the FRBM framework.
He is also likely to write to Prime Minister Narendra Modi and Sitharaman formally requesting that the Metro Rail debt be excluded from the state’s borrowing limit.
The government hopes such a relaxation will not only enable the takeover of L&T’s liabilities but also clear the way for Central approvals for Metro Phase-2 projects, which the state wants to begin without further delay.
For 2025-26, the state government had projected borrowing Rs 64,539 crore. The Centre capped this at Rs 54,009 crore in line with FRBM norms. Of this, Telangana has availed Rs 45,900 crore between April and September (first half of fiscal), or 85 per cent of the ceiling.
With only `8,109 crore headroom available for the remaining half of the fiscal, officials concede that meeting day-to-day requirements for welfare schemes and development works will be challenging, let alone absorbing additional debt of such magnitude.
The issue has compounded worries in the finance department, particularly after its repeated appeals to the Centre for relaxations have gone unanswered.
Deputy Chief Minister Mallu Bhatti Vikramarka had met Sitharaman on September 4, followed by Revanth Reddy on September 9. Both urged the Union minister to allow the state to raise `30,000 crore through a special-purpose corporation, over and above FRBM limits, for construction of 105 Young India Integrated Residential Schools and to upgrade infrastructure in government schools and colleges. No approval has been forthcoming so far, making the possibility of the Centre agreeing to exclude the Metro loan appear slim.
To arrange immediate funds, the government is banking on the monetisation of Raidurg lands and advance revenue from liquor shop licences for the next two years, for which notifications have already been issued. Despite these efforts, financial constraints continue to pose a formidable challenge. Officials admit that unless the Centre agrees to relax borrowing rules, Telangana may find it extremely difficult to complete the Metro takeover and push forward with expansion plans.
