MUMBAI: State govt has reversed its decision to acquire the Versova-Andheri-Ghatkopar Metro-1, three months after approving it. The decision was finalised during a cabinet meeting on Tuesday.

Metro-1, the oldest in the city, is the only corridor executed through a public-private partnership. It is run by a special purpose vehicle (SPV), Mumbai Metro One Private Ltd (MMOPL).

MMRDA has a 26% stake in the SPV, while Anil Ambani’s Reliance Infrastructure (R-Infra) holds 74%.

On March 11, the state cabinet had cleared the purchase of R-Infra’s 74% stake in Metro-1 for Rs 4,000 crore by Mumbai Metropolitan Region Development Authority (MMRDA). However, MMRDA expressed its inability to finance the acquisition. It requested state govt funding, which was denied, leading the state cabinet to cancel the purchase plan.

A review report by MMRDA highlighted the infeasibility of the acquisition under the current circumstances, prompting the decision. The challenges in the acquisition process included the outdated system of Metro-1, audit concerns, regulatory violations, and legal complexities, which collectively contributed to the decision to halt the purchase.

Responding to the development, a R-Infra spokesperson said, “MMRDA is a valued partner of MMOPL. We will continue to serve Mumbaikars by maintaining a punctuality of 99.9%.”

The concession agreement between MMRDA and MMOPL was signed in 2007, and the corridor became operational in 2014.

The buyout would have allowed MMOPL to exit the project, four years after it had asked state govt to purchase its stake in 2020, following losses incurred during the Covid pandemic.

Officials clarified that Metro-1 was not making operational losses, but the financially troubled R-Infra wanted to exit the project. The line currently carries 4.6 lakh passengers daily.

MMOPL is also engaged in arbitration against MMRDA over cost escalation during the construction of Metro-1. While MMOPL claims it cost Rs 4,026 crore to build Metro-1, MMRDA claims the cost is Rs 2,356 crore as per the original contract.

MMOPL was also facing insolvency proceedings in the National Company Law Tribunal (NCLT). State Bank of India initiated insolvency proceedings in Aug 2023 due to defaults amounting to Rs 416 crore, and IDBI Bank in Oct 2032 over dues of nearly Rs 133.4 crore.

NCLT disposed of the insolvency cases after MMRDA paid Rs 170 crore, which is 10% of the one-time settlement amount fixed at Rs 1,711 crore.