Telangana Govt takes over Hyderabad Metro Phase 1 as L&T exits project

Hyderabad, India (Metro Rail Today): In a significant development for urban mobility in Hyderabad, the Telangana government has agreed to take full control of the Hyderabad Metro Phase 1 project, marking the formal exit of infrastructure giant Larsen & Toubro (L&T) from its metro rail operations in the city. The move paves the way for the long-awaited Phase 2 expansion and resolves years of uncertainty around the public-private partnership model.

As part of the agreement, the state will assume approximately ₹13,000 crore in debt from L&T Metro Rail Hyderabad Limited (LTMRHL) and make a one-time settlement payment of ₹2,000 crore for L&T’s equity investment. This marks a major reduction from L&T’s initial proposal, which had sought ₹5,900 crore for its equity stake in addition to full debt assumption.

The agreement was finalised following high-level discussions between Telangana Chief Minister A. Revanth Reddy and L&T CMD S.N. Subrahmanyan on Thursday. While the state had expressed a strong preference for L&T's continued involvement in Phase 2, the company reiterated its strategic decision to exit the transportation concession business, declining participation as an equity partner.

The transition will enable the Telangana government to present a unified ownership structure for upcoming phases, easing concerns raised by the Government of India about operational integration between Phase 1, which was privately developed, and the proposed government-managed Phase 2.

L&T had previously cited challenges in signing a Definitive Agreement for joint operations due to concerns over revenue and cost-sharing mechanisms. The final settlement includes the company’s proposal to divest its complete stake, enabling the formation of a state-controlled metro rail entity—essential for future central approvals.

“The takeover ensures not just continuity but also unlocks the potential for seamless integration and future-ready expansion of the metro system. Hyderabad deserves a world-class, scalable mass transit network, and this decision brings us closer to that vision,” said Mrs. Mamta Shah, MD & CEO of Urban Infra Group, commenting on the development. “A fully public model also allows greater transparency, equity, and alignment with long-term urban mobility goals.”

The change in ownership is expected to accelerate the approval process for the proposed 163-km Phase 2A and 2B expansions, which aim to meet Hyderabad’s growing transportation demands. Once a leader in India’s metro development race, Hyderabad has now dropped to ninth position in terms of metro network length—down from second in 2014.

The Centre had earlier insisted on a comprehensive Definitive Agreement outlining operational continuity, revenue mechanisms, and risk-sharing between phases before processing Phase 2 proposals. This new arrangement satisfies those concerns and brings renewed hope for metro expansion.

Meanwhile, L&T also referred to the July 2022 Supplementary Concession Agreement during negotiations, highlighting that ₹2,100 crore remains due from the state out of a previously agreed ₹3,000 crore interest-free loan.

With this resolution, Hyderabad Metro now enters a new phase of public ownership, unlocking the potential for transformative growth, integration, and city-wide connectivity.