With the Cabinet's recent approval, the Central Government will now finance about 65 per cent of the total estimated cost of the Chennai Metro Phase 2, including a loan of Rs33,593 crore and an additional Rs7,425 crore in equity and subordinate debt.
According to the Ministry of Finance, the remaining 35 per cent of the project costs will be covered by the State Government.
The Ministry of Finance will engage with key bilateral and multilateral agencies, including the Japan International Cooperation Agency, Asian Development Bank, Asian Infrastructure Investment Bank, and New Development Bank, following the Union Cabinet's approval of Chennai Metro Rail Project Phase 2.
New Funding Structure and Loan Flow Modifications
The discussions will aim to renegotiate loan agreements to reflect the new funding structure- designating the loans as liabilities of the Central Government rather than the State Government, modifying the flow of loan funds so that they are directed from the agencies to the Central Government and then to CMRL, replacing the previous arrangement where funds flowed from agencies to the State Government.
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Appointing the Ministry of Housing & Urban Affairs, through CMRL, as the project executing agency, superseding the previous arrangement where the State Government acted as the executing agency.
The Ministry has already initiated the process for these changes to the loan and project agreements, ensuring that they are completed expeditiously in collaboration with the State Government.
Repayment Terms and Financial Responsibilities
It is important to note that the responsibility for repaying these loans will fall on CMRL, with repayments expected to commence following a five-year moratorium after project completion.
Should CMRL face difficulties in repayment, the State Government will be obliged to provide financial support to ensure loan repayment during those years.
The Union Cabinet has officially approved the Chennai Metro Rail Project Phase 2 as a 'Central sector' project, with an estimated total cost of Rs63,246 crore on October 3.
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This decision, made on Saturday, marks a major shift in the funding structure for the project, which was previously managed as a 'State sector' initiative, primarily financed by the Government of Tamil Nadu.
Previously, the Tamil Nadu government bore approximately 90 per cent of the project costs, with the Central Government contributing only 10 per cent of the estimated expenses, excluding land costs and certain other expenditures, in accordance with the Metro Rail Policy of 2017.