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

Chennai metro boost: The central government will finance 65per cent of the Chennai Metro Phase-2 project, which has an estimated cost exceeding Rs 41,000 crore, according to a statement from the finance ministry on Saturday.

The Union Cabinet, on Thursday, cleared the construction of three corridors under the Phase-2 of Chennai Metro, with a total estimated cost of Rs 63,246 crore.

Of this, the Centre's contribution will amount to over Rs 41,000 crore.

The finance ministry’s statement specified that the Centre’s funding will cover nearly 65per cent of the project cost. This includes a loan of Rs 33,593 crore, along with Rs 7,425 crore for equity and subordinate debt.

The remaining 35per cent of the project will be funded by the Tamil Nadu government.

"The loans obtained from multilateral and bilateral development agencies will be considered central government loans and directly provided to Chennai Metro Rail Ltd (CMRL) through the Central Government’s budget," the statement mentioned.

Previously, the project was categorised as a 'state sector' initiative, where the Tamil Nadu government bore nearly 90per cent of the financing responsibility, with the Centre contributing only 10per cent, excluding land acquisition and certain other items as per the Metro Rail Policy of 2017.

The central government also played a role in helping the state secure Rs 32,548 crore in loans from bilateral and multilateral agencies, out of which around Rs 6,100 crore has been utilized so far.

With the Union Cabinet’s recent approval, the burden of arranging loan financing has shifted from the state government to the Centre. This will allow the Tamil Nadu government to reallocate Rs 33,593 crore for other developmental purposes.

The finance ministry also stated that, following the Cabinet’s decision, it will approach agencies such as Japan International Cooperation Agency (JICA), Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), and New Development Bank (NDB) to renegotiate loan terms and project agreements.

While CMRL is responsible for loan repayment, repayments will typically begin after a moratorium of at least five years, which aligns with the project's expected completion timeline.

If CMRL is unable to meet its loan obligations, the Tamil Nadu government will be required to provide financial support to ensure repayment during those years, the ministry added.

(With PTI Inputs)