L&T may seek Rs. 1,500cr more as VGF to make Metro viable.

Who will blink first? That describes the current standoff between the government of Telangana and Larsen & Toubro (L&T), the concessionaire for the Hyderabad Metro Rail project whose continuance is now in doubt. Though L&T is going ahead with the metro rail construction (except for corridor 2 which runs through the Old City and near the assembly), the project also entails commercial real estate development. This is to make the highly capital intensive project viable.

But due to the bifurcation of the state, realty prices have hit rock bottom. At the present level of real estate prices, L&T cannot expect to break even on the project. For this, as per internal estimates the company will require sops.

More real estate could be made over to L&T for commercial exploitation as a sop. As per the contract agreement, the company has already been handed over 259 acres of land across the city for commercial exploitation. With a higher quantum of land even at lower prices, the company can make enough money for the project to become viable. The other way is to grant the project a higher quantum of 'viability gap funding' (VGF). All highly capital intensive projects with long gestation are granted VGF by the Union government.


TOI