Public sector institution to conduct HMR forensic audit before State takeover

A central public sector financial institution is likely to conduct a forensic audit of Hyderabad Metro Rail (HMR) Phase One accounts, currently managed by the Public-Private Partnership (PPP) concessionaire L&T Metro Rail Hyderabad (L&TMRH), to help the State government complete the takeover process, according to informed sources.

Two months ago, the State government announced its decision to take over the 69.2-km HMR Phase One by paying ₹15,000 crore to L&TMRH after the latter declined to participate in the integration with the proposed HMR Phase Two (2A), a 76.4-km expansion across five corridors estimated to be costing an estimated ₹24,269 crore.

The Centre has sought integration of HMR Phase One and Phase Two for passenger convenience and for forming a Joint Venture (JV) with the State government. This JV would enable sourcing of multilateral funds from institutions such as ADB (Asian Development Bank) and JICA (Japanese International Cooperation Agency) at minimal interest rates.

While the precise mandate for the chosen public sector financial institution is not yet public, sources said the agency will carry out a title verification audit to quantify liabilities, clear land title records allotted to L&TMRH under the PPP contract, and examine issues related to costing, operations and maintenance.

The audit is expected to be completed within three months, not only because the Centre may announce its JV decision after March but also due to large-scale attrition at various levels within L&TMRH and its operations and maintenance partner, Keolis.

It is imperative for the government to secure financial, technical, regulatory and operational information, as this could impact HMR Phase One operations and the financial and regulatory viability of the proposed Phase Two expansion, they said.

Key issues such as software and hardware settings for signalling, traction, safety overrides and maintenance manuals must be documented and transferred seamlessly to the new operator, considering that the existing O&M contract with Keolis expires in less than a year, explained sources.

The comprehensive audit, expected to lay the roadmap for a smooth transition from a PPP project to a government-owned entity, will have to prioritize public interest, they said, requesting anonymity.