Chennai Metro Rail phase 2: Credit for Centre, debt for CMRL, TN govt

CHENNAI: Even as the supporters of Tamil Nadu’s ruling DMK and Centre-ruling BJP-led are slugging it out on social media as to which regime gets the credit for the Rs 63,246-crore second phase of Chennai Metro Rail, the Union Finance Ministry issued a statement on Saturday stating that it was a central sector project after the Union Cabinet recently granted approval for it.

To buttress the point, the statement added that the Centre would now be financing almost 65 per cent of the estimated cost of Chennai Metro Phase 2, including the entire required loan of Rs 33,593 crore, besides the equity and subordinate debt of Rs 7,425 crore.

So far, the project was being implemented as a ‘State sector’ project, with the Tamil Nadu government being primarily responsible for raising 90 per cent of the estimated project cost.

With the recent approval granted by the Union Cabinet, the loans availed from multilateral and bilateral development agencies would be treated as the loans to the central government and would be provided directly to CMRL from central budget, it said.

Now, the Centre would renegotiate the loan and project agreements with Japan International Cooperation Agency (JICA), Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), and New Development Bank (NDB) to treat the loans as loans to the central government and not to the State government.

Also, the loan flow route would be changed from the agency to the Centre and from central budget to CMRL directly as the pass-through assistance instead of the present arrangement wherein the agency gives it to Tamil Nadu government, which in turn allocates it to CMRL from the State budget.

The renegotiation would also include “designating Ministry of Housing and Urban Affairs acting through CMRL being the project executing agency in place of the State government through CMRL”, the Finance Ministry statement said.

“The process for these changes to the loan and project agreements, and the related documents has been initiated, and will be completed expeditiously in coordination with the State government,” it added.

However, there is a not-so-small matter about repayment. Even though the Centre has assumed responsibility for arranging the funding – and hence the credit for the project – the responsibility of repayment of the loan would be on CMRL (and the State government if it cannot repay the money).

“In the event of CMRL not being in a position to repay the loan, it would be the obligation of the State government to provide financial support to the company to enable the repayment in those years,” the Ministry said.