Political Heat Rises as L&T Links Free Bus Scheme to Metro Rail Woes

 The ongoing political turbulence surrounding the Hyderabad Metro Rail project has intensified, with Larsen & Toubro (L&T) linking a decline in metro ridership to the free bus travel scheme for women in Telangana. This attribution has stirred significant controversy as L&T reiterates its intent to sell its stake in L&T Metro Rail Hyderabad (L&TMRH), the entity responsible for the metro’s operations.

image sources : Telangana Today 

L&T's Financial Struggles and Political Statements

L&T has been vocal about its plans to divest from the "non-core" business of metro rail operations, which span over 69.2 km across three corridors. The company's recent claim that the free bus travel initiative for women has led to decreased metro ridership has not been well received by the Telangana government.

The Hyderabad Metro Rail project, amidst the ongoing Parliament elections, has turned into a contentious political issue. L&T attributes the reduced ridership to the state's free bus travel scheme, which has agitated government officials. This comes at a time when the company is reportedly facing significant financial challenges, including an estimated ₹300 crore loss each quarter and a debt burden of around ₹8,000 crore.

Financial Performance of L&T Metro Rail Hyderabad

Since its operations began, L&TMRH has struggled financially. In the fiscal year 2017-18, the firm reported a loss of ₹58.36 crore against a revenue of ₹69.53 crore. The losses have escalated over the years: ₹148 crore in 2018-19, ₹382 crore in 2019-20, ₹1,766 crore in 2020-21 during the pandemic, ₹1,745 crore in 2021-22, and ₹1,315.95 crore in 2022-23. Despite these financial setbacks, metro ridership has been gradually increasing, hovering between 4.7 lakh to 4.9 lakh daily.

Government officials argue that the losses are primarily due to high debt interest rates rather than operational inefficiencies. They also point out that the demand for increased metro services, such as more coaches and trips, has not been met by L&TMRH, exacerbating the situation.

Public-Private Partnership and Property Development

The Hyderabad Metro Rail project is unique as a public-private partnership (PPP). To make it financially viable, the government granted L&TMRH the rights to develop property on 269 acres of prime land. This land, allocated for depots and parking areas at various stations, was intended to generate additional revenue through property development.

L&TMRH has constructed four malls, totaling about 1.8 million square feet, significantly less than the planned six million square feet by now out of the 18.5 million square feet it is entitled to develop. Additionally, the company sold its concessional rights on 15 acres at Raidurg for approximately ₹1,200 crore and is attempting to monetize the built-up malls and remaining land parcels to alleviate its debt burden.

Government's Perspective and the Future of L&TMRH

Government officials have expressed frustration with L&T's public statements, suggesting that these remarks are counterproductive and damage the company's own interests. There is a concern that no potential buyers will emerge for L&TMRH’s stake given the current negative portrayal of the project.

The situation is a classic catch-22. The government is reluctant to be seen as yielding to corporate pressures, while L&TMRH cannot abandon or sell the project unless it becomes profitable. Enhancing profitability would require significant capital investment to increase services and attract more passengers. However, the latest public dispute makes it unlikely that the government will provide the promised financial assistance.

Conclusion

The Hyderabad Metro Rail project remains a focal point of political and financial contention. L&T's linking of the free bus travel scheme to a decline in metro ridership has sparked a significant political reaction, complicating the already challenging financial landscape for L&TMRH. As both parties navigate this complex situation, the future of the metro project hangs in a delicate balance, with the need for increased investment and improved services becoming ever more pressing.