CHENNAI: The tug-of-war between the centre and Tamil Nadu on the status of Phase-II of Chennai Metro Rail project seems to have cast a shadow on the project, with just Rs 8,000 crore of the planned Rs 12,000 crore likely be spent on the project during the current financial year. This would be a nearly 40% markdown on the projected spending this year.
The Rs 63,246 crore-project has been facing headwinds since last year due to financial issues and this year may not be different. The dispute may not only impact the project deadline, it may also affect the state’s borrowing capacity from external agencies.
The Chennai Metro Rail Limited (CMRL) till August has spent Rs 2,900 crore of Rs 12,000 crore earmarked for Phase-II of the project in the state budget for 2024-25, sources said.
While Union Finance Minister Nirmala Sitaraman has categorically stated that it’s a state sector project and the Tamil Nadu government is entirely responsible for the funding, the state has given its own reasons on why it wants the centre to release funds for the project.
The state government, which has been entirely funding the Phase-II project so far, had reduced the actual funding from Rs 10,000 crore to Rs 9,000 crore last year, sources said.
While there is an overall drop in project funding, the drawing of funds for other components, including repayment and interest on loans for Phase-I and Phase-I metro rail extension, too, may be affecting the actual share of money spent on the project infrastructure. Money is also being used to meet cash loss (operational revenue loss) from the budget allocation, sources said.
The Phase-II of the project started facing trouble ever since the centre started calling it a state project.
TN reluctant to share borrowing load as it would affect debt ceiling
In the first phase, funds and loans through external funding agencies were flowing directly from the centre and work was progressing smoothly as it was termed a ‘central’ project. But in 2018, the CMRL got funding from the Japan International Cooperation Agency’s (JICA) modified Special Terms of Economic Partnership (STEP) without linking the same to the sanction of the union government.
Since then, it was branded as a ‘state’ project and external borrowings are being routed entirely through the state. Though Tamil Nadu has secured enough funds from external agencies, it is reluctant to share the entire borrowing load as it would adversely affect the debt ceiling set under the Fiscal Responsibility and Budget Management (FRBM) Act.
As per the FRBM Act, states can borrow only up to 3% of their GSDP. If the project is implemented as a central sector project, the burden of loan will be shared with the centre and Tamil Nadu can use external borrowings for other projects of its choice and also remain within the borrowing limit set under the Act.
Also, for maintaining a healthy debt-equity ratio in its balance sheet, CMRL also needs equity participation by both the union and state governments. The CMRL has been urging the Department of Economic Affairs to reconsider the undertaking as a central project and make equity contribution, as a healthy balance sheet will help the company access loans under better terms from multilateral agencies.
According to Tamil Nadu Finance Minister Thangam Thennarasu, Chennai Metro Rail Limited has till now spent Rs 18,564 crore for Phase-II of the project. Of the total money spent, Rs 11,762 crore was from TN’s own resources and Rs 6,802 crore was through loans from foreign financial institutions. The centre has not yet disbursed even one rupee of the Rs 7,425 crore recommended by the Public Investment Board (PIB) for the project, he had alleged.