Grey areas persist as key audit gaps surface in Hyderabad Metro Phase‑I buyout

The final word may not have been spoken on the Telangana government’s plan to take over 69.2 km Phase I of Hyderabad Metro Rail (HMR) from PPP (Public-Private Partnership) concessionaire L&T Metro Rail Hyderabad (L&TMRH) by the end of next month.

While the state government has announced its commitment to pay ₹15,000 crore (₹13,000 crore in debt and ₹2,000 crore in equity) to acquire the first phase along the high-traffic Red (29 km, LB Nagar to Miyapur), Blue (29 km, Nagole to Raidurg) and Green (11 km, JBS to MBBS) corridors, L&TMRH has a few gray space left.

To begin with, two consultants appointed by the government’s special purpose vehicle Hyderabad Metro Rail Limited (HMRL) have submitted only preliminary reports so far. While IDBI Capital has been appointed to conduct an independent non-technical audit of the financial and accounting aspects of HMR Phase I, Delhi Metro International Limited (DMIL), a subsidiary of Delhi Metro Rail Corporation (DMRC), is examining the technical aspects of the project. Their final report is expected to be submitted by mid-March.

“A preliminary report is just that. Final reports may contain much more complex details. The government’s decision will depend on these findings. Both consultants are public sector organizations of high repute and have been chosen to ensure that the public interest remains paramount with thousands of taxpayers’ money at stake,” senior official sources said, requesting anonymity.

The consultants were also asked to review the numerous short- and long-term contracts signed by L&TMRH to ensure that none of them would present legal obstacles in the future.

On the technical side, DMIL’s preliminary findings reportedly indicate that the government may need to invest Rs 1,000 crore or more to compensate for wear and tear and maintain existing operating capacity without expanding HMR Phase I. The agency inspects rolling stock, electric traction systems, CBTC (Communications Based Train Control) technology, depots, stations, maintenance practices, safety standards and other operational components.

Hyderabad Metro | Photo Credit: File photo

Meanwhile, the financial advisor appeared to have reached the Rs 15,000-crore procurement figure and reportedly admitted that he had not been able to access complete financial transaction records from L&TMRH since the inception of the project due to their voluminous nature, till the time of submission of the preliminary report, sources said.

It is not clear whether the report takes into account the concessionaire’s significant transactions such as the concessionaire’s 15-acre Raidurg land lease worth ₹ 1,200 crore, interim loan of ₹ 900 crore given by the previous BRS government, revenues earned in the last eight years and other such details.

The committee of officials headed by Chief Secretary K. Ramakrishna Rao and the Cabinet Sub-Committee comprising Deputy Chief Minister Mallu Bhatti Vikramarka and Ministers D. Sridhar Babu and N. Uttam Kumar Reddy were informed about these reports. However, it is not known whether these issues were discussed or not.

The final reports of both consultants will be submitted first to HMRL, which will present a consolidated report to the Cabinet Sub-Committee to determine the financial framework of the agreement. “Consultants have been appointed to conduct a comprehensive audit, so it would be presumptuous to finalize the procurement figure of Rs 15,000 crore without fully reviewing all financial transactions and technical status of HMR Phase I. The completed audit reports should determine the final outcome,” sources said.

The takeover of HMR Phase I has become critical for the State government as it may then approach the Central government to take forward the proposed Joint Venture (JV) for the 162 km Metro Phase II (A and B), estimated at ₹42,000 crore along eight corridors in the capital region.

This is the result of L&TMRH’s reluctance to integrate HMR Phase I with the proposed Phase II. It is also clear that the procurement of 60 new metro buses, a process initiated by HMRL and awaiting government approval, can only go ahead after the takeover, when the metro rail system becomes a fully state-run enterprise.