Centre to finance 65% of Chennai Metro Phase 2 project: Finance Ministry

The central government will finance 65 per cent of the estimated cost of Chennai Metro Phase-2 project, which will add up to over Rs 41,000 crore, the finance ministry said on Saturday.

The Union Cabinet on Thursday approved a proposal to construct three corridors under the Chennai Metro Rail project phase-2 involving a total estimated cost of Rs 63,246 crore.

The Centre's share adds up to over Rs 41,000 crore.

In a statement, the finance ministry said the central government will finance almost 65 per cent of the estimated cost of Chennai Metro Phase 2.

This will include the entire required loan of Rs 33,593 crore, besides the equity and subordinate debt of Rs 7,425 crore.

The balance 35 per cent of the estimated cost will be financed by the state government.

"The loans taken from multilateral and bilateral development agencies will be treated as the loans to the central government and will be provided directly to Chennai Metro Rail Ltd (CMRL) from the Central Government's budget," the statement added.

So far, the project was being implemented as a 'state sector' project with responsibility of the project financing being primarily on the Government of Tamil Nadu to the extent of almost 90 per cent of the estimated project cost.

The role of the central government was to finance 10 per cent of the project cost, excluding land cost and few other items as per the Metro Rail Policy 2017.

However, the central government had also assisted the state government in mobilisation of Rs 32,548 crore as loans from bilateral and multilateral agencies to the state government directly, of which about Rs 6,100 crore has been utilised so far.

Before the approval of the project by the Centre, the responsibility of providing or arranging the loan financing for the project was on the state government.

The Union Cabinet's approval has freed up budgetary resources of the state government to finance other development activities to the extent of Rs 33,593 crore, the finance ministry added.

"In pursuance of the Union Cabinet's approval, the Ministry of Finance will be approaching the bilateral and multilateral agencies, namely Japan International Cooperation Agency, Asian Development Bank, Asian Infrastructure Investment Bank and New Development Bank for renegotiating the loan and project agreements," the ministry said.

The responsibility of repayment of the loan will be on the company (CMRL). The repayment would normally start after a moratorium of at least five years, i.E., more or less after the completion of the project.

"In the event of CMRL not being in a position to repay the loan, it would be the obligation of the State Government to provide financial support to the company to enable the repayment in those years," the ministry added.