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The blame game begins Hyderabad Metro – a unique model
Hyderabad Metro – a unique model
India’s construction and engineering giant, L&T, is investing for the first time in a mega infrastructure project in a city, the Hyderabad Metro. This promises to change the life style of millions of Hyderabad citizens, much the same way they became Netizens when cyber city was launched a few years

Ups and downs in the metro

The project is transformational because it will realign the city life along the metro corridors. The metro will slash journey time across the corridors by 50-75 per cent. This will help productivity, efficiency and profitability. Other benefits include sharp reduction in pollution as the Metro substitutes electricity for petrol. However, on the flip side, globally there have been quite a few miscalculations on the revenue assessments of Metro rail projects. For example, by 1999-2000, Kolkata Metro had a ridership level of only 10 per cent of what was initially projected. A US Department of Transportation Study of ten rail projects in US revealed that, on average, actual ridership was 65 per cent lower than that forecasted in initial assessments. – Mahalakshmi Kumar

THE HYDERABAD METRO, being executed by L&T Metro Rail, could well become a trendsetter for metro rail projects across India on the public private partnership model, judging by the way L&T has taken the leap of faith investing in it. Claimed to be the world’s largest metro rail project in the public private partnership (PPP) model, Hyderabad Metro covers a distance of nearly 72 km and connects the old city to the IT hub of Hyderabad.

Talking to Industrial Economist in his office in Hi-Tech City, Chief Executive and Managing Director, Vivek B Gadgil, said that the Hyderabad Metro Rail project was the largest investment made by L&T in a single city. The entire project involves an investment of Rs 16,375 crore at today’s costs. The project would be executed in five years, with all lines commissioned by 2017. The project cost has factored cost overruns as also any time overruns.

Project outline

Line One will run from Miyapur to LB Nagar and will connect the outskirts of Hyderabad to the upcoming developed areas in Miyapur. Line Two connects JBS with Falaknuma and will pass through the Old City. And Line three running from Nagole to Shilparamam will connect the undeveloped outskirts of Hyderabad to the important areas of the upmarket Banjara Hills, Jubilee Hills and finally Hi-Tec City. These will be commissioned on various dates running from March 2015 to Dec 2016. 

Funding patterns

According to Gadgil, most of the funds for the project would come through internal accruals. L&T, hitherto seen as a contractor for major infrastructure projects in India and worldwide for airports and such others, is investing in a project on a design build finance operate transfer (DBFOT) model. The shareholding by L&T group companies is 100 per cent.

L&T will bring in equity to the extent of Rs 2439 crore and the funding for the entire project is of the order of Rs 16,375 crore (USD 3025 million). Term loans are being arranged by a consortium of 10 nationalised banks led by the State Bank of India. L&T Metro Rail has been granted the concessionaire agreement to run and maintain the project for 30 years by the Andhra Pradesh government and for an automatic renewal of another 25 years subject to certain conditions being satisfied.
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