Chennai Metro Phase 2: Central government to finance 65% of project cost – Infrastructure News

The Union Cabinet has approved a major shift in financing for the Chennai Metro Rail Project Phase 2, now designated as a ‘Central sector’ initiative. The total estimated cost is Rs 63,246 crore, with the Central Government committing to cover approximately 65 percent, including a loan of Rs 33,593 crore and an additional Rs 7,425 crore in equity and subordinate debt.

The remaining 35 percent will be financed by the State Government, marking a significant collaborative effort to enhance Chennai’s urban transport. The Ministry of Finance plans to engage key bilateral and multilateral funding agencies, such as the Japan International Cooperation Agency and the Asian Development Bank, to renegotiate existing loan agreements. The aim is to redefine the funding structure by designating the loans as liabilities of the Central Government, altering the flow of funds to channel them from these agencies to the Central Government and then to Chennai Metro Rail Limited (CMRL).

New Executing Agency Designated

The Ministry of Housing and Urban Affairs will now act as the project executing agency through CMRL, replacing the previous arrangement where the State Government held this role. The Ministry has already initiated changes to the loan and project agreements in collaboration with the State Government to expedite the process.

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CMRL will be responsible for repaying the loans, with repayments commencing after a five-year moratorium following project completion. Should CMRL face repayment difficulties, the State Government will be obliged to provide financial support to ensure the loans are repaid.

This decision, made on October 3, marks a significant departure from the previous funding model, which saw the Tamil Nadu government bearing nearly 90 percent of the project costs while the Central Government contributed only 10 percent, highlighting the evolving dynamics of urban infrastructure financing in India.

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