The Centre and the Ministry of Housing and Urban Affairs (MoHUA) have asked the Telangana government to directly raise and service the proposed loan for the takeover of Hyderabad Metro Rail (HMR) Phase-I, rather than route it through its special purpose vehicle (SPV) — the Hyderabad Metro Rail Limited (HMRL). According to officials, this is a key prerequisite for the Centre to proceed with a joint venture arrangement for the implementation of HMR Phase-II project.

“MoHUA wants the State government to follow the Jaipur Metro model. Under this, the existing SPV — Jaipur Metro Rail Corporation (JMRC), wholly owned by the Rajasthan government — executed the first phase of about 11 km, while the second phase of 41 km was taken up by Rajasthan Metro Rail Corporation (RMRC), a 50:50 joint venture with the Centre,” informed sources on Wednesday.

According to the plan, once JMRC is free of debt and liabilities, it would be merged with RMRC, resulting in a single entity jointly owned by the State and the Centre. This entity would operate metro services and could potentially undertake projects in other cities as well, said the sources.

Under the proposed 50:50 joint venture structure, about 48% of the project cost would be funded through loans, while the State government would bear 30% of the cost and the Centre 18%. The remaining 4% would come through public-private partnerships (PPP) for minor works.

Union Ministers Ashwini Vaishnaw (Railways), Manohar Lal Khattar (MoHUA) and G. Kishan Reddy (Coal and Mines) are learnt to have urged Telangana Chief Minister A. Revanth Reddy to adopt this model. According to sources, this approach could help free HMR Phase-I from debt repayment obligations rather than being burdened with the now stalled ₹13,527 crore loan from the Indian Railway Finance Corporation.

The reported plan is to identify a suitable agency to fund the takeover of HMR Phase-I from L&T by the government at a purported lower interest rate with the help of SBI Caps. The agency will be assessing the valuation of Phase-I and the financial aspects of the proposed Phase-II which could possibly sweeten the deal, they said.

“A higher valuation of HMR Phase-I and the Centre becoming an equal partner in the new SPV handling both phases will also make it easier to secure funding from financial institutions at concessional rates for HMR phase-II,” they said.

However, the arrangement would also mean a greater role for the Centre in HMR affairs, including decision-making and appointment of key officials, the sources acknowledged.