L&T - the concessionaire of Hyderabad Metro Rail Project has officially announced its plan to exit from the project. The debt-laden and COVID-19 hit project has been always in the news for cost overruns. DK Sen, whole-time director and senior executive vice president (development projects), L&T in a statement revealed the company's plan to disinvest some of the company's non-core assets.
The non-core assets that are on sale include - 1400 megawatt (MW) Nabha thermal power project in Punjab, the Hyderabad Metro, and L&T Infrastructure Development Projects Ltd (L&T IDPL), the subsidiary having road projects and power transmission lines, the company statement said. But it neither mentioned if the entire stake will be disinvested nor mentioned any timeline to achieve the target.
In the case of the Hyderabad Metro Rail project, L&T has been suffering losses ever since the start of the project. The estimated cost of the project is Rs 16,571 crore, which has risen to Rs 18,971 crore due to various reasons. Of this, Rs 13,500 crore was raised through L&T loans. In addition, it has run into a loss of Rs 383.20 crore in 2019-20. In 2020-21, these losses together stood at Rs 1,766 crore. The main reason for this is the complete suspension of Metro Rail services for almost six months from March 23 to September 8, 2020, due to COVID-19. Now the services are running but not as crowded as before COVID. With this, it is expected that losses can not be avoided this financial year as well.
As the number of passengers decreased and the cost of the project increased, so did the principal, interest payments burden on the company. With the work-from-home of employees, the number of passengers is unlikely to increase significantly in the near future. L&T has asked the Telangana government to provide an assistance of Rs 5,000 crore to get out of this predicament. However, there has been no response from the government.