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Mamata Banerjee was unhappy with the Teesta water-sharing accord and refused to accompany Prime Minister Manmohan Singh during the Bangaldesh visit.

But the strained relationship may come back on track, courtesy what observers call the prime minister's 'railway diplomacy'.

The UPA government has decided to take full responsibility for the Rs 4,874 crore (Rs 48.74 billion) East-West Metro Corridor project, a move likely to save the cash-strapped Bengal government at least Rs 1,000 crore (Rs 10 billion).

Kolkata Metro Rail Corporation, initially a joint venture between the Union urban development ministry and the West Bengal government, is developing the project that will connect Salt Lake to Howrah.

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Both the state government and the Union urban development ministry have 30 per cent and 25 per cent stake in KMRC, respectively, while the balance 45 per cent of the project cost was taken as loan from the Japanese Bank of International Cooperation.

"The state government has already incurred some expenses, as the project is under way. Still, even now, the state will save at least Rs 1,000 crore (Rs 10 billion) by giving up the project.

"Given the present situation, Rs 1,000 crore saved is equivalent to Rs 1,000 crore earned," a state government official said.

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This year, the state government had earmarked Rs 142 crore (Rs 1.42 billion) for the project.

According to government sources, after slipping into the role of chief minister, Banerjee initially wanted to keep the project with the state.

But realising the huge burden, she later wanted to hand it over and wrote to railway minister Dinesh Trivedi, asking the railways to bear responsibility for the project cost.

Both the state government and the Union urban development ministry will hand over their stakes in the project to the railway ministry.

"There is already a metro run by the railways in Kolkata and there are plans for further expansion. So, it is better if it is under one umbrella. Even post-handover, KMRC will be executing the project," said Subrata Gupta, managing director of KMRC.

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According to Gupta, two committees are working out the modalities for handing over the project and the matter is likely to be finalised shortly.

Bengal's finances are not in a state where Banerjee can afford the luxury of refusing a helping hand from the Centre.

Soon after the elections, Banerjee had rushed to the Centre, demanding a special bailout package of Rs 47,000 crore (Rs 470 billion) for the state.

However, all that Bengal has got so far is a higher Plan allocation, which according to Banerjee, is good enough to pay salaries for the next four-five months.

Technically too, the takeover of the project by the railways is likely to smoothen the execution.

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The stand-off between the railways and the Kolkata Metro Rail Corporation over transfer of land at Howrah and Sealdah stations had put the East-West Metro corridor in limbo for about two years.

That is finally set to end.

"Earlier they were not ready to hand over the land. Now, the railways has agreed. The problem with Howrah is almost sorted out. For Sealdah also, we are in talks," Gupta said.

The undergound construction work at Howrah is likely to start in October, while for Sealdah it will take another three months.

Of the total 13.7 km route of the East West Metro, about 5.7 km will be elevated, while the remaining eight km will be underground.