Central Government Steps In to Fund Chennai Metro Phase 2
The Union Cabinet has approved the Chennai Metro Rail Project Phase 2 as a ‘Central sector’ project. The Central Government is set to finance nearly 65% of the project’s estimated cost. This marks a significant shift in the financial responsibility. Previously, the State Government of Tamil Nadu held most of this responsibility.
New Financial Structure
The Chennai Metro Phase 2 was previously classified as a ‘State sector’ project. The Tamil Nadu government was responsible for almost 90% of the project cost. The Central Government contributed just 10%. This excludes the cost of land and some other items, as per the Metro Rail Policy of 2017.
With the new approval, the Central Government will now provide Rs. 33,593 crore in loans, equity, and subordinate debt, covering 65% of the total estimated cost of Rs. 63,246 crore. The State Government will cover the remaining 35%.
Loan and Budgetary Adjustments
The loans previously arranged by the State Government will now cover a larger portion of the costs. International agencies like Japan International Cooperation Agency (JICA), Asian Development Bank (ADB), and others provided these loans. They will now be treated as loans to the Central Government. These funds will flow directly from the Central Government’s budget to Chennai Metro Rail Limited (CMRL).
This new arrangement frees up Rs. 33,593 crore in Tamil Nadu’s budget, allowing the state to allocate funds to other developmental activities.
Ministry of Finance and International Agencies Involved
The Ministry of Finance will renegotiate loan agreements with international agencies to reflect the new financing structure. The responsibility of managing the project has also shifted to the Ministry of Housing & Urban Affairs, working through CMRL.
Loan Repayment Responsibility
Although the Central Government is covering a significant portion of the project cost, the repayment responsibility remains with CMRL. Repayment will begin after a moratorium period of about five years, once the project is complete. If CMRL is unable to meet its repayment obligations, the State Government will provide the necessary financial support.
This new arrangement is expected to accelerate the development of the Chennai Metro Rail Project Phase 2. It will ease financial pressure on Tamil Nadu’s budget.
Also Read | GAIL and AM Green Ink MoU for Developing 2.5 GW Renewable Energy and Green Chemical Projects