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The Chennai Metro Rail Project Phase 2 has taken a significant step forward, transitioning from a 'State sector' project to a 'Central sector' project, signifying a major shift in funding responsibilities. The Union Cabinet's approval, announced by the Ministry of Finance on October 5th, designates the project with an estimated cost of Rs 63,246 crore as a central government priority. This decision marks a departure from the previous framework where the Tamil Nadu government was responsible for approximately 90% of the project's financing.
Prior to this approval, the Central Government's contribution under the Metro Rail Policy 2017 was limited to 10% of the project cost, excluding land and specific items. However, with the new approval, the Central Government will now shoulder nearly 65% of the estimated cost, encompassing a loan of Rs 33,593 crore and equity and subordinate debt amounting to Rs 7,425 crore. The remaining 35% of the project costs will be borne by the Tamil Nadu government. This substantial increase in central funding signifies the government's commitment to enhancing public transportation infrastructure in Chennai and its dedication to supporting the project's success.
The Ministry of Finance has also announced that it will renegotiate existing loan agreements with key bilateral and multilateral agencies, including the Japan International Cooperation Agency, Asian Development Bank, Asian Infrastructure Investment Bank, and New Development Bank. These negotiations aim to reclassify the loans as liabilities of the Central Government instead of the State Government. This change will ensure that loans are directly provided to Chennai Metro Rail Limited (CMRL) from the Central Government's budget, streamlining the funding process and reinforcing the central government's role in the project's financing.
The responsibility for executing the project will now lie with the Ministry of Housing & Urban Affairs, acting through CMRL, effectively transferring project management from the State Government to the central authority. Loan repayments are expected to commence after a five-year moratorium, coinciding with the project's anticipated completion. Should CMRL face difficulties in meeting repayment obligations, the State Government is obligated to provide the necessary financial support, highlighting a shared responsibility between the central and state governments in ensuring the project's financial stability.
Source: Chennai Metro Rail project phase 2 secures 65% central government financing