In a significant policy reversal, the state government has abandoned its plan to acquire a 74% stake in the Versova-Andheri-Ghatkopar Metro-1 corridor from Reliance Infrastructure (R-Infra), just three months after initially approving the move. The decision, finalized during a recent cabinet meeting, marks a pivot from the March 11 approval where the Mumbai Metropolitan Region Development Authority (MMRDA) was slated to purchase the stake for Rs 4,000 crore.
Metro-1, the city’s oldest corridor, operates under a public-private partnership through Mumbai Metro One Private Ltd (MMOPL), where MMRDA holds a 26% stake. The acquisition plan was shelved after MMRDA expressed its inability to fund the purchase, prompting the state government’s decision to withdraw financial support. A review report cited by MMRDA outlined several challenges that rendered the acquisition impractical under current circumstances. These included outdated infrastructure, audit concerns, regulatory breaches, and legal complexities associated with the acquisition process. These factors collectively contributed to the decision to halt the purchase plan.
Responding to the development, an R-Infra spokesperson reaffirmed their commitment to serving Mumbaikars through MMOPL, highlighting the metro’s impressive punctuality record of 99.9%. The concession agreement for Metro-1 was signed in 2007, with operations commencing in 2014. The proposed buyout would have enabled MMOPL to exit the project, following financial setbacks exacerbated by the Covid-19 pandemic, despite the metro line itself not operating at a loss. MMOPL has been engaged in arbitration with MMRDA over cost escalations during the metro’s construction. While MMOPL claims construction costs amounting to Rs 4,026 crore, MMRDA asserts the original contract value was Rs 2,356 crore.
Previously, MMOPL faced insolvency proceedings initiated by State Bank of India and IDBI Bank due to outstanding dues totaling Rs 549.4 crore. The National Company Law Tribunal (NCLT) resolved these proceedings after MMRDA made a partial payment of Rs 170 crore, representing 10% of the agreed one-time settlement amount.
The decision to halt the stake acquisition underscores ongoing challenges in public-private infrastructure partnerships, particularly in reconciling financial obligations and operational efficiencies amidst regulatory scrutiny and market dynamics.
