• The fare hike controversy


    Relief for commuters uncertain after SC refuses to issue TRO

    Last of three parts

    IN a decision that surprised many observers and disappointed protesters against the increase in light rail fares imposed on January 5 by the Department of Transportation and Communications (DOTC), the Supreme Court on Tuesday (January 13) refused to grant a temporary restraining order (TRO) sought by four separate petitions to stop the fare hike.

    Instead, the high court directed the DOTC and officials from the Metro Rail Transit Corporation (MRTC) and the Light Rail Transit Authority (LRTA) to respond to the allegations made by the petitioners within 10 days.

    Renato Reyes, Secretary General of the Bagong Alyansang Makabayan (Bayan) group which filed one of the petitions, had a bitter reaction to the decision, scoring it as contrary to the message of the visiting Pope Francis.

    “The sufferings of the commuters will continue. The illegal fare hikes will continue. Only the government and private traders will benefit. This means during the visit of the Pope, they will earn more because devotees will surely take the trains. This is very sad because this is contrary to the message of Pope Francis to take care of the poor instead of favoring big business. We will not stop in our advocacy,” Reyes said.

    Divining the SC’s thoughts
    A well-placed source at the Supreme Court, speaking on condition of anonymity, admitted that many people in the court itself were surprised by the decision, for which the en banc offered no explanation.

    “This case seemed very similar to the Meralco rate hike issue,” the source said, referring to the December 2013 issuance of a TRO—later extended for an indefinite period of time—against an increase in electric rates. “So we were also a little surprised that a TRO was not issued.”

    Asked for comment on why the Court ruled differently this time, the source was quick to point out: “That is for the Justices to answer when they issue a ruling after the respondents have given their side. So I cannot really guess.” The source explained, however, that one basic guideline to the issuance of a TRO is whether or not harm is being done to someone, and if so, how much.

    “Opinyon lang, it may be that the Justices do not see the same kind of harm in this case as in the Meralco case,” he suggested. “The public, the consumers in that case, did not have a choice but to get their electricity from Meralco, so the increase in electricity rates was something they couldn’t avoid. With the MRT fare issue, people have other options. They can take a bus or a jeepney, for example. So it could be that the harm seen to be done by not issuing a TRO is much less. But again, that may not mean anything. The Justices speak for themselves through their rulings, so we’ll just have to wait for that.”

    “Even so, I’m also curious myself,” he added. “I ride the train, too.”

    Murky legal questions
    On his personal website, former Bayan Muna representative Teodoro Casiño, whose petition is one of the four filed before the Supreme Court (the others were submitted by former Iloilo Representative and TESDA head Augusto Syjuco, Bayan, and the United Filipino Consumers and Commuters), explains what he describes as six “fallacies” of the government’s justification for the fare hike:

    • The fare hike is needed to rehabilitate and upgrade the LRT and MRT train systems. Casiño points out that the 2015 General Appropriations Act already contains P4.65 billion for subsidies for the MRT-3 and P7.4 billion for the line’s rehabilitation. In addition, the P22-billion supplemental budget for 2014 passed by Congress just before the Christmas break contained P1.2 billion for MRT-3 rehabilitation, and P727.6 million for improvements to the LRT-1 and LRT-2 lines, thus obviating the need for higher fares which, as Wednesday’s installment of this special report revealed, will actually amount to about P618 million in additional total revenue for the two system operators.

    In its statement of income and expenses, the MRT recorded subsidies received from the government as lump sums, and curiously, the figures for expenses for “Repairs & Maintenance—Railways” and “Repairs & Maintenance —Communications Equipment” are left blank. Consequently, it is not clear what part, if any, of the subsidies received are actually applied to maintenance and upgrades. Moreover, the build-lease-transfer (BLT) agreement between the DOTC and the MRTC signed in August 1997 does not address the issue of fare subsidies at all.

    • The fare hike will benefit consumers. Casiño contends that the savings realized by the government from reducing its subsidy will, instead, be used for payments to the system operators, something DOTC Secretary Joseph Emilio Abaya at least partly confirmed by admitting that about P1 billion of the estimated P2 billion reduction will be diverted to an escrow fund to cover equity lease payments (ELPs). As with the issue concerning the use of subsidies, however, it is not at all clear whether this constitutes any sort of legal violation; while ELPs are extensively discussed in the BLT agreement, nothing is said about the manner in which the government should source the funds.

    • The fare hike will re-channel limited public funds for education and health, as well as development projects in the Visayas and Mindanao. With this, Casiño alludes to the use of funds declared as “savings” by the controversial “disbursement acceleration program,” or DAP, declared fundamentally unconstitutional by the Supreme Court last year. His explanation suggests, however, that any legal problem that might arise would be a new issue, one that might not necessarily be attributable to the subsidy reduction and resulting fare hike.

    • The DOTC Secretary, the LRT Board and the MRT 3 Office followed due process and are authorized to raise fares. Here Casiño points out a glaring problem with the oversight of the light rail system: “The train lines being a public utility or service, its rates should be approved by an appropriate quasi-judicial body like the LTFRB for bus, jeeps and taxis, the Marina for shipping lines, the CAB for airlines, MWSS-RO for water rates, ERC for power rates, etc. However, in the case of the LRT and MRT, no such body has yet been mandated to deliberate and approve changes in their rates.”

    The allegation, which is found in all four petitions, is that the DOTC—which at least in the case of the MRT-3 is, in fact, granted regulatory oversight over it according to its BLT agreement, which further specifies that the MRT is not a franchised public service—did not follow due process in deciding on the fare hike. DOTC’s Abaya has disputed this in numerous public statements, explaining that the fare hike was first proposed in 2011 and approved after a public hearing held in December 2013. Whether that constitutes “due process” or not will depend on the SC’s reading of the guidelines set forth for the DOTC on vetting and approving fare adjustments, if any actually exist.

    • The new fares are just and reasonable. Highlighted in all four petitions and explained in Wednesday’s installment of this special report, both the LRTA and MRTC are operationally profitable, with fare collections being between 1.09 and 1.17 times their operations and maintenance costs. The implication here is that fare hikes simply increase the profits of the two operators, perhaps more than the rate of return contractually guaranteed by their respective BLTs.

    • Subsidizing the LRT and MRT is an injustice to taxpayers in the Visayas and Mindanao. This was the original justification given by the government for the fare increase, and in fact is stated in DOTC Department Order 2014-014 that authorized the fare hike. Casiño joins numerous other commentators (including The Manila Times and several of its columnists) in condemning this rationale as a pedantic view of the use of public funds on a national scale, further pointing out that Metro Manila accounts for about 60 percent of the entire economy, which more than justifies subsidizing rail fares.

    Poor oversight may be to blame
    Whether any of those refutations of the government’s position actually constitutes a legal question the SC can act on is uncertain at this point. What has clearly emerged, however, is the lack of a separate body such as the Energy Regulatory Commission (ERC) to serve an oversight capacity independently from the essentially commercial arrangement between the DOTC and the two light rail operators, or as an alternative, a clear set of regulations governing the DOTC’s management of fares that supersedes the terms of public-private partnership contracts. That being the case, Congress, rather than the Supreme Court, might be the eventual source of relief for aggrieved commuters.

    A schedule for a further hearing on the fare hike issue has not yet been set by the Supreme Court, but could take place as early as January 27.



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