L&T Metro Rail Hyderabad (LTMRHL) estimates that the project cost is likely to escalate anywhere between Rs 2,500 crore and Rs 3,000 crore owing to technical challenges. LTMRHL is building a 72-km elevated Metro project in Hyderabad, through PPP mode and the cost at the time of signing the concessionaire agreement in 2010 was Rs 14,132 crore.
"The project is in a critical mode. If the present condition continues, then there could be cost escalation of R2,500 crore to R3,000 crore," VB Gadgil, LTMRHL CEO and MD said.
He said they have completed 28% of the project and are hopeful of overcoming other challenges as well. The 72-km project is expected to be ready by 2016-17 and the first phase of 8-km is expected to be commissioned by March 2015. "By the time of completion, there could be cost escalation because of factors including technical alignments, rising inflation, high interest burden and sliding of rupee,'' he added. "If required, we can even swap 50% of our loan and are in talks with bankers and investors. However, we are not diluting equity as of now," he added.
The LTMRHL head said that core issues which have to be immediately sorted are demolition of properties and clarity on Metro Act.
The Hyderabad project has already raised a debt of R4,800 crore carrying an interest rate of 12.5%. It is in negotiations with India Infrastructure Finance Co to raise R1,000 crore through external commercial borrowings for the project. "We are looking at long term loans as the interest rates are cheaper,'' he said.