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There will be a sigh of relief for Tamil Nadu with the Union Cabinet, on Thursday, approving the second phase of the ₹63,246 crore Chennai Metro project, fulfilling a long pending demand from the State government to the Centre.
“Thank you, Hon’ble PM @narendramodi, for accepting our request during my last meeting with you and approving the second phase of the Chennai Metro Rail Project. This long pending demand of the people of Tamil Nadu having been addressed now, we are confident of completing the project at the earliest !” Tamil Nadu Chief Minister MK Stalin said in a social media message.
Till now, the Centre consistently maintained that it was a State project and that the responsibility rested with the State government to manage it.
In a recent interaction with The Hindu Group, the Union Finance Minister Nirmala Sitharaman to a query on Phase-II of the Chennai Metro, mentioned that if there were to be an equity contribution from the Centre, it would likely be around ₹7,400 crore. However, in 2018, it was consciously decided by the State (Tamil Nadu) government to have it as a State sector project. If you (TN) have decided this to be a State sector project, then, the duty of the Centre, particularly the Department of Economic Affairs, would be to help the State in getting an international loan.
However, the approval by the Union Cabinet on Thursday comes after Chief Minister MK Stalin met Prime Minister Narendra Modi last Friday to release the Union Government’s share for Phase 2 of the jointly implemented Chennai Metro Rail project. Stalin noted that several States, which initiated their Metro projects after Tamil Nadu had already received their funds.
On the Chennai Metro Rail project, the Chief Minister, in the memorandum presented to Prime Minister Modi in Delhi, said that the progress of the project slowed down due to the fiscal constraints faced by the State government. Last year, due to limited fiscal space, the State government had to instruct CMRL to slow down the pace of work and take a budget cut from ₹10,000 crore to ₹9,000 crore.
The slowdown from last year is impacting the current financial year as well, limiting the project expenditure to ₹8,000 crore. Consequently, the commissioning dates of various stages are being delayed by almost a year, pushing the completion date from December 2027 to December 2028. This will lead to time and cost overruns.
For phase II of the project, CMRL needs to secure a principal debt of ₹33,593 crore and a subordinate debt of ₹17,434 crore. Without corresponding equity contribution, this will result in an unfavourable debt-to-equity ratio, potentially rendering CMRL unsustainable as a going concern.
“I request the Prime Minister to kindly intervene in this matter and facilitate early approval of Phase II of the Chennai Metro Project under a 50:50 equity sharing basis between the Government of India and Government of Tamil Nadu, as was done for Phase-I and as recommended by the PIB,” the memorandum said.
Two days ago, Tamil Nadu BJP President K Annamalai urged the Prime Minister to consider infusing 50:50 equity sharing for phase II of the Chennai Metro Phase II project.
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