Gov’t to spend not earn from MRT-LRT PPP bid

Published by rudy Date posted on May 9, 2011


The government would be spending instead of earning in the planned auction of the country’s two mass railway systems, the Metro Rail Transit (MRT) and the Light Rail Transit (LRT), that will kick off President Aquino’s pet programs under the so-called public-private partnership (PPP) schemes, an Aquino ally in the Senate said.

Sen. Ralph Recto said the auction will actually be a “pay-out” to the winning private bidder.

It’s not the other way around, Recto said, saying the P15 billion “tag price” will also include tax breaks and allow the winning bidder the option to increase fares.

The senator’s revelations came as he demanded the administration to be “forthright to the Filipino people” about the planned transaction which happens to be the first projects under PPP scheme.

“The people, before any translation is lost, should be informed that the P15 billion price tag for the bundled MRT-LRT privatization is the amount that government will pay to the winning bidder and not the amount that it would earn from the transaction,” Recto, chairman of the committee on government corporation and public enterprises, said.

The senator added this simply means that the first project under the PPP program would instantly cost the government some P15 billion, instead of raising fresh revenues from its decision to let go two crucial mass transport rail systems.

Recto, who also chairs the Senate ways and means committee, pointed out the P15 billion would be paid by government to the winning bidder which would operate and maintain the MRT-LRT lines.

“We will pay them P15 billion to operate the rail lines plus perhaps they would avail themselves of tax holidays, cheap loans from state banks and an almost sure option to jack up fare prices,” he said.

Recto nevertheless added under the O&M (operate and maintain) contract, the winning private operator is not obligated to pour in new money in terms of additional rolling stocks or coaches and rail infrastructure.

“If such is the case, this will give the PPP project a bad name. Later on, if this will continue, it will likely backfire and only enrage the public,” he pointed out.

Recto said Palace economic managers may justify the P15 billion “pay out” to the private operator if compared to the almost P7 billion to P8 billion that government shells out in yearly fare subsidies to maintain low fares for MRT riders alone.

“The P15 billion ‘pasalubong’ to the winning private bidder may be justified but the prospect of commuters eventually paying higher MRT-LRT fares negates such justification,” Recto said.

He added the PPP auction of the MRT-LRT lines should redound to cheaper fare rates since the PPP dictum should be “race to the bottom (lower fares), not race to the top (higher fares).”

Recto also said such imminent fare hikes in MRT-LRT would be unfair to taxpaying commuters while jeepney and tricycle drivers are getting direct subsidy through the government’s “Pantawid Pasada” program.

The government has slated the bidding for the MRT-LRT contract on July 11 with at least eight major groups landing on the short-list of the Department of Transportation and Communications out of the 44 companies that have expressed interest in the project.

The winning bidder will get to operate and manage the two rail lines that would be integrated eventually for four years, with an option to extend by another year. LRT-1 runs along Taft Avenue from Baclaran in Paranaque City to Roosevelt-Munoz, Quezon City.

The MRT, meanwhile, runs from Taft Avenue in Pasay City to North Avenue in Quezon City.

The government tried to sell the two mass transit projects to the Chinese. Aquino’s economic managers were recently in China for a four-day roadshow in which Chinese firms indicated interest in bidding for the first five projects under the PPP initiative.

The delegation was headed by Finance Secretary Cesar Purisima and had as members Public Works and Highways Secretary Rogelio Singson, Trade and Industry Secretary Gregorio Domingo, Transportation and Communication Undersecretary Ruben Reinoso Jr., Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr., Investor Relations Office (IRO) executive director Claro Fernandez and PPP executive director Philamer Torio.

The mission went to Beijing and Shanghai to talk with investors that include those from the China Contractors Association, power provider State Grid of China Corp. and China Railway Engineering.

“We want to encourage our Chinese investors to put their money in the Philippines and invest in our infrastructure projects. We want to deliver the message that the Aquino administration is committed to transparent negotiations with them unlike before when dealings have been veiled in backroom exercises,” Purisima said.

The government had already indicated plans to raised MRT and LRT fares with a boarding fee of P11 and a P1 charge for every kilometer for both the lines.

As a result of the new fares, traveling the entire length of the MRT line, a total of 17 kilometers from Taft Avenue in Pasay City to North Avenue in Quezon City, would cost P28.

For the LRT Lines 1 and 2, the maximum fares will be P30 and P25, respectively.

Implementation of fare hike in the Metro Manila rail systems has been repeatedly postponed, mainly due to appeal of the riding public.

Labor groups, including the Trade Union Congress of the Philippines (TUCP), said that of the 4.2 million workers in Metro Manila, some 2.18 million are minimum wage earners, and many of them take the trains to work every day.

The government, however, said the fare increase is inevitable as the Metro Rail Transit Authority (MRTA) and the Light Rail Transit Authority (LRTA) needed funds to implement upgrading and maintenance of the trains which suffer from continuous wear and tear from daily operations. –Angie M. Rosales, Daily Tribune

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