Hyderabad Metro Rail Limited has severed its ties with the Delhi Metro Rail Corporation by mutual consent with immediate effect.

The Andhra Pradesh government had earlier entered into a memorandum with DMRC appointing the latter as prime consultant for the Hyderabad metro project. The five-year contract was for Rs 19 crore. The state government has so far paid Rs 4 crore to DMRC.

The development comes a day after the state government demanded an unconditional apology from DMRC Managing Director E Sreedharan for his remarks on the HMRL project in his letter to Planning Commission Deputy Chairman Montek Singh Ahluwalia.

The state government has agreed to pay another Rs 85 lakh for the consultancy services offered by DMRC till date, said HMRL Managing Director NVS Reddy.

DMRC has been involved with the Hyderabad project in structuring the detailed project report. It also nominated its senior officials as committee members for evaluation of the bids and other aspects of the project.

In place of Prime Consultants, HMRL has decided to have independent engineers. It is now making a request for proposal for inviting global consultancies for filling the void after the DMRC exit. "We will have new consultants appointed by December," NVS Reddy said adding that the term would be for five years.

The project developer will have its own general consultants who will make the design and drawings. They will be then submitted to the independent engineers who will vet the designs and recommend changes, if required.

Sreedharan, credited with the implementation of the Delhi metro project, remarked in his letter that the negative viability gap funding in case of the Hyderabad metro project had resulted solely on account of 296 acre of prime land being made available to the Build-Operate-Transfer (BOT) operator for commercial exploitation.

"This is like selling the family silver. Apart from the fact that this might lead to a big political scandal some time later, it is apparent the BOT operator has a hidden agenda which appears to extend the metro network to a large tract of his private landholdings so as to reap a windfall profit of four to five times the land price," Sreedharan pointed out in his letter, the copy of which was released to the media by HMRL Chairman CVSK Sarma on Monday.

Reacting to this, Sarma said the state government would not back off from filing a defamation case if Sreedharan did not tender an apology.

On the other hand, DMRC, in a late evening release yesterday, stated: "DMRC neither smelt a scam in the way that the BOT contract was awarded for the Hyderabad metro nor did Sreedharan say that the BOT model would backfire."

According to the release, Sreedharan had, however, pointed out that Hyderabad's success in BOT model should not be cited as an argument for changing the policy of the government for funding metro projects in the country.