COMMUTERS slammed on Monday the Department of Transportation and Communications (DOTC) for entering into a rail contract that effectively placed the riding public on the losing end due to the inevitable fare hike at the Light Rail Transit (LRT) Line 1.
National Center for Commuter Safety and Protection President Elvira Medina said the government and the private concessionaire must first improve the services of the railway system before imposing any increase in ticket prices.
“The commuters want to see improvements of the service first, before any increase. If there will be no improvements in the service, then we will not allow any fare hike. We will exhaust all legal means if this is going to happen,” she told the BusinessMirror in a phone interview.
She added that Transportation Secretary Joseph Emilio A. Abaya “must have enough wisdom to look into the plight of the consumers before allowing this to happen.”
The Light Rail Manila Corp. (LRMC) is demanding the the government to implement a fare increase ahead of its takeover in October 2015.
Metro Pacific Investments Corp. (MPIC) President Jose Ma. K. Lim explained the consortium’s plea for a fare hike is part of its requirements before financially closing the P64.9-billion LRT Line 1 Cavite Extension deal.
“There are offers from several banks, and we don’t want to close until we have all the requirements. One of the most critical aspects is the fare increase which we hope will be implemented in a timely fashion, so that we have enough time to close with the banks,” he pointed out.
He refused to disclose the banking institutions that will be tapped for the deal, but he stressed the need for the fare hike to convince lenders that the consortium has enough revenue stream to pay for the debt.
David J. Nicol, chief financial officer of the infrastructure giant, said the group is targeting to financially close the deal by the first half of 2015.
“We at the moment have three willing lenders. [But] a financial close [is not likely to take place] until the middle of next year. There is a huge amount of work that has to go in from now to get to financial close, including what the tariff is going to be,” he added.
The implementation of the fare increase on the three overhead railway systems in the Philippines dating back to 2011 had long been delayed,
Sought for comment, Transportation Spokesman Michael Arthur C. Sagcal said the government will be forced to increase the passenger ticket prices as the hike is part of the contract signed by the government and the private concessionaire for the extension of the train system.
“The contract presumes that the P11+1 formula is already in effect since the proposed fare increase was supposed to have been implemented three years ago,” he explained. “The fare increase could be implemented anytime, it has been pending since 2011,” he said.
This means that for LRT 1, the proposed fare hike would be P30 for single journey and P29 for stored value tickets from Roosevelt in Quezon City to Baclaran in Pasay City from an existing P20 fare.
Under the key infrastructure contract inked on Thursday, the concessionaire will shoulder the market risks of the project, while the regulatory risks remain with the government. This means that there will be annual increases in fares, but will only be implemented every two years.
The 5-percent annual increase, the contract showed, is meant to cover the effects of inflation.
The fare increase was sought by railway regulatory bodies in 2011 as the three overhead train lines have been operating at a loss, forcing the national government to subsidize bulk of their expenses.
This include daily operating expenses, such as overhead, power supply and salaries. They also include costs for repairs and replacement of train and rail parts, and for the payment of existing debts.
Government officials tagged the financial position of the train systems as “anemic” as reflected in the deficit posted in 2012.
The LRMC will start operating and maintaining the LRT 1 by October next year, and the construction of the additional stations to Cavite will start thereafter. It will take five years from now for the extension to be commercially operational.
“Our immediate objective is to get familiar with the assets and conditions of those assets. We want to work closely with the existing organization and turn the operations over smoothly in 12 months,” Lim said.
The tandem of MPIC and Ayala Corp. was the lone bidder during the auction for the P65-billion deal. The LRMC’s offer carried a P9.35-billion premium on top of the project cost.
Under the 32-year concession agreement, the consortium will operate and maintain the existing line and construct and 11-kilometer extension from the present end-point at Baclaran to the Niog area in Bacoor, Cavite.
A total of eight new stations will be built along this route, which traverses the cities of Parañaque and Las Piñas up to Bacoor, Cavite.
In signing the agreement, the concessionaire agreed to invest P35 billion to construct the extension of line, which is envisioned to help ease the worsening traffic conditions in the Parañaque-Las Piñas-Cavite corridor.
The remaining P30 billion will be spent by the government to procure train coaches, construct and expand depots, and the acquisition of the right of way.
The extension is expected to enhance commercial development around the rail stations.
Image credits: Alysa Salen