Hyderabad Metro Phase 2 Expansion Hits Roadblock as L&T Objects to Network Integration

Hyderabad, India (Metro Rail Today): The ambitious Phase-2 expansion of Hyderabad Metro Rail, which aims to transform urban mobility across the city, has hit a significant roadblock as Larsen & Toubro (L&T), the operator of Phase-1, objected to the proposed integration of the new corridors with the existing network. The state government is now actively working to resolve the standoff, even as concerns grow over financial viability and operational continuity.

According to senior government sources, L&T has pegged its total investment in Phase-1 at ₹20,000 crore, which includes ₹7,000 crore in equity and ₹13,000 crore in loans. The government, however, has valued the equity at ₹15,000 crore and offered L&T two options:

1. Open market sale of its stake, with the state committing to match the highest private bid.

2. Transfer the ₹13,000 crore loan to the state, which would then pay ₹2,000 crore for the equity portion.

Despite this offer, L&T has reportedly expressed unwillingness to proceed, citing "unreasonable issues" in the proposed integration and even threatening to exit operations unless the government buys out Phase-1 for ₹20,000 crore—a demand rejected outright by Chief Minister Revanth Reddy.

Phase 2: A Make-or-Break Expansion

The proposed Phase 2 Metro expansion spans 76.4 km across five new corridors, with a total investment of ₹24,000 crore under a joint venture model with the Centre. It is expected to push daily ridership from 5 lakh to 15 lakh passengers, helping to eliminate the annual loss of ₹600 crore currently incurred by Phase-1 operations.

“If ridership triples, the present losses can be wiped out. Without expansion, they will only mount,” said an official close to the discussions.

L&T’s current losses are attributed largely to two factors:

• Inadequate soft loan support during the COVID-19 pandemic. Of the ₹3,000 crore promised by the previous BRS government, only ₹900 crore was released.

• Underutilisation of 200 acres of land granted for commercial development, a key component of the project's revenue model.

State Plans Low-Interest Loan Backed by Sovereign Guarantee

To finance Phase 2, the state government plans to raise a loan at 4% interest, backed by a sovereign guarantee from the Union government. This would significantly reduce operational costs and improve project feasibility.

Officials estimate that once fully operational, Metro revenue could reach ₹10 crore per day, with Rs 2 crore in daily profit projected after covering operating costs and loan repayments.

“Metro expansion is not just about connectivity—it’s about financial sustainability. Without Phase-2, the current system risks becoming a stranded asset,” a top government source said.

Industry Perspective

Commenting on the situation, Mrs. Mamta Shah, MD & CEO of Urban Infra Group, said:

“A unified and seamless Hyderabad Metro network is critical to realising its full economic and social potential. Delays in integration or expansion risk undermining the project’s long-term viability. With strategic alignment and collaboration between stakeholders, Hyderabad can emerge as a model for public-private partnerships in urban transport.”

What’s Next?

The Centre has reportedly asked the Telangana government to sign an MoU with L&T as a prerequisite for project integration. Parallelly, the state is moving ahead with technical and financial planning to ensure timely commencement of Phase-2.

For now, the fate of Hyderabad’s Metro future hinges on negotiations between L&T and the government. If resolved amicably, the Phase-2 rollout could help the city leap into a new era of mass rapid transit efficiency and economic growth.

Stay tuned to Metro Rail Today for the latest updates on Hyderabad Metro and urban transit developments across India.