Hyderabad metro cost escalation estimated to be Rs 3,000 cr

The Hyderabad metro rail is “estimated to face a cost escalation of Rs 2,500-3,000 crore”, mainly on account of rising costs of borrowing for the initially estimated Rs 14,132-crore project.

According to L&T Hyderabad Metro Rail Ltd chief executive and managing director VB Gadgil, “high interest rate on the loan amount is the single largest element” contributing to the cost escalation for the 72-km long elevated project.

L&T, the concessionaire for the project, however, is working out all options to minimise the impact of rising costs, including a proposed arrangement for swapping of debt for low-cost funds and also external commercial borrowings (ECBs), said Gadgil.

L&T today indicated it was in advanced stage of talks with lenders for swapping debt worth Rs 1,000 crore.

“ We’re confident of clinching a deal on this with the lenders (mainly banks) in the next 20 days,” Gadgil said, and added, the proposal was likely to be discussed in a meeting with the bankers tomorrow. At present, the cost of funds for the project stood at 12.5 per cent per annum.

However, securing funds through ECBs seems to be a tough task for L&T as it was finding it difficult to hedge them fully from currency fluctuations. “We tried to secure some funds through ECBs but there is little opportunity for us to hedge them 100 per cent,” he said.

The project developer so far has spent around Rs 5,000 crore, including Rs 1,400-1,500 crore through equity infusion and Rs 3,500 crore, which came as bank loans. L&T is expected to infuse further equity in the project. The project is expected to generate 50 per cent of the revenues through passenger fare, 45 per cent from transit-oriented real estate development and the rest from leasing the station space for advertisements.

Speaking to mediapersons today, Gadgil said the project was in a “very critical mode” and he was confident of breaking the deadlock on the realignment of a section of metro. The Telangana government is insisting on realignment at two places to save heritage structures.

Meanwhile, Hyderabad Metro Rail Ltd managing director NVS Reddy said the ongoing test run involving seven trains, supplied by the Hyundai-Rotem venture of South Korea, across the 8-km stretch was expected to be completed by January 2015.