Hyderabad metro on a tricky track, running on losses

They have built only 1.2 million sq ft so far as against eligible 18.5 million sq ft. Metros all over the world lose money and are heavily subsidized by governments

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Hyderabad metro on tricky track, running on losses
Hyderabad metro on tricky track, running on losses

HYDERABAD (Metro Rail News): Metro Rail MD NVS Reddy said that L&T Metro project is running in losses. Reacting to allegations of Hyderabad Intellectuals, a forum on Twitter, which alleged that “the Metro project has been reduced to world-class real estate project, and L&T is milking the project as they want”, Reddy said that L&T was losing money in the project. “Rs 1,300 crore per annum is the interest burden alone on the Hyderabad Metro project.

They have built only 1.2 million sq ft so far as against eligible 18.5 million sq ft. Metros all over the world lose money and are heavily subsidized by governments,” Reddy said. L&T has spent about Rs 16,000 crore on the project in which the viability gap funding is Rs 1,200 crore from the Centre.

The rest, Rs 14,800 crore was spent by L&T, of which Rs 3,000 crore is equity and Rs 12,000 crore debt.

Reddy said, “There are around 200 Metro projects in the world, and no Metro makes a profit. Governments subsidize Metro projects for survival and for increasing liveability condition of the city. In public-private partnerships, there are four or five attempts made, including Bangkok Metro, which is 35-km long, the biggest in PPP mode.” Reddy said, “I studied financially successful Metros such as the ones in Hong Kong, Tokyo, Singapore, and Taipei.

They are originally built by governments and handed over to the private sectors. We have adopted the same.” He added that 50% of the revenue came from passenger fare, 45% from property development, and 5% from advertisements. “As per the original financial model, Metro will run into losses for five to six years, and break-even only in the seventh year, that is 2025. Currently, revenue is Rs 1 crore per day.”

When it came to the number of passengers, Reddy said compared to other Metros, Hyderabad was doing much better. “In Chennai, even after four to five years and with several incentives, there are only 50,000 to 60,000 passengers a day. After seven years of Bengaluru Metro, the figure has now reached to four lakh a day.

Hyderabad Metro will reach four to five lakh passenger figure in the next year.” He said, “There are some companies that are into construction, and some into signaling and telecom. But L&T has end-to-end experience.” Reddy said, “They have built real estate projects in Panjagutta, Irrum Manzil, Hitech City and now in Moosarambagh. They are doing good so far.”

Hyderabad Intellectuals replied to Reddy, saying, “If L&T Hyderabad Metro project is losing money, why subsidize such huge values of public property for an unviable project? 1.2 million sqft itself looks huge, 18.5 m sqft would be staggering. If values calculated for 33 years of the lease, it’s definitely profitable multiple times.”

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2 COMMENTS

  1. The so-called intellectuals have no work other than criticising projects that make the life easier for the citizens.

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