THE government has relinquished the operation of the Light Rail Transit 1 (LRT 1) to the Ayala and Metro Pacific consortium, the lone qualifying bidder for the project, after the privatization deal was signed on October 2 at the Department of Transportation and Communications (DOTC).
But two groups—the Bagong Alyansang Makabayan (Bayan) and Ibon Foundation—issued separate warnings that the deal, which they said is disadvantageous to the government and onerous, too, will eventually lead to increases in train fare.
Bayan called the signing of the consortium agreement the “end of an era” for the first LRT line that began operations in 1984.
“The concession agreement with the private consortium allows for automatic fare increases, profit guarantees and will result in additional debt burden on the public. Ironically, the government will be spending more in the name of guaranteeing private profits,” the group said in a statement.
Bayan secretary general Renato Reyes Jr. said he was puzzled why the signing of the deal was not given much media attention when it affects hundreds of thousands of train commuters.
“Commuters should brace for fare hikes for the LRT 1 now that the privatization deal has been signed between the government and the Ayala-MVP [Manuel V. Pangilinan] group. The fare hike is a certainty and the winning bidder is now asking for its implementation,” Reyes added.
Pangilinan has stakes in various media outlets, including TV and radio networks and national dailies.
Reyes claimed that the details of the agreement remain hidden. Even Malacanang seemed unaware of the provisions in the signed deal as Presidential Communications Secretary Herminio Coloma Jr. said he still has to study its contents.
“I need to know and understand the salient provisions of the contract as a basis for making an informed comment,” the official said in a text message to The Manila Times.
Meanwhile, Ibon Foundation noted that the P64.9 billion contract for the LRT 1 Cavite extension will mean greater costs for the tax-paying public and more fare hikes for commuters, while assuring guaranteed profits for Light Rail Manila owners.
According to the group, the Aquino government has given all-out concessions to the Light Rail Manila Consortium, led by the Ayala Corp. and Pangilinan’s Metro Pacific Investments.
“On the surface, it appears that the consortium will be spending P39.4 billion and billions more in operating and maintenance expenses. In reality, the government is actually shelling out more than the private concessionaire as it uses official development assistance [ODA] in financing some P34.9 billion [or more than half of the total project cost]for right of way acquisition, purchase of coaches, civil works, etc.,” said the group in a statement posted on its website.
“This means that Light Rail Manila benefits from the lower borrowing costs of the government including from ODA, aside from an additional P5 billion subsidy for ‘viability gap funding’,” it added.
Like Bayan, Ibon alleged that the consortium also enjoys various perks such as real property tax exemption (estimated at P64 billion), an annual stand-by fund and a differential generation cost for power spikes, among others. Government will shoulder all these costs and will eventually be recovered through fare adjustments for commuters and higher taxes for the public.
The concession agreement allows the Ayala and Pangilinan consortium to implement automatic and regular fare increases, starting with the implementation of the so-called notional fare. This provision is actually a fare hike because it will result in an increase of fares up to 101.7 percent per trip depending on the route.
The LRTA previously approved a new fare matrix for the LRT 1 where the new maximum fare will go up from P20 to P30, according to Reyes.
The average fare hike based on the average distance usually traveled will be P4.70 per trip, said the DOTC. The approval of the fare adjustment was a condition for the privatization deal. The contract also allows for a 10.25 percent automatic fare adjustment every two years and the rebasing of fares based on inflation.
“Increases in power rates can also be passed on to commuters. The government will pay the private company if the latter fails to collect the fare hike. The deal is truly onerous,” Reyes said.
Unlike the Metro Rail Transit 3 that is hounded by controversies, LRT 1 is a viable mass transport system that is working fine under government control. First operated in 1984, the train system serves an average of more than 470,000 passengers a day.
“We maintain that the concession agreement is grossly disadvantageous to the public. It will be disastrous for the commuters,” Reyes said.
The following are some of the “dreadful” features of the concession agreement, according
1. The contract allows private operators a 10.25 percent fare increase every 2 years and a 5 percent increase upon the completion of the extension project.
2. If the fares set by the government is less than the fares demanded by the private operators, the government will have to pay for the difference. This is called deficit payment.
3. Commuters or the government will pay for surges in electricity rates. Under the agreement, this is called the differential generation cost. This lays the basis for another fare hike or another government payment.
4. Fares will be adjusted based on the prevailing inflation rates.
5. The government pays for the real property taxes for the 32-year duration of the contract. This can reach up to P64 billion for the term of the contract.
6. The concessionaire will only pay the government 10 percent of the concession fee of P9.3 billion up front after the signing of the contract. The rest of the concession fee will be paid starting on the 5th year of the contract. This means that the payments for the concession fee may actually be coming from the operations of the existing train lines.
7. Around 964 employees of the LRTA are in danger of losing their jobs as they will only be absorbed by the private operator for six months.
With the deal, the Ayala and Metro Pacific consortium will have control of the operations and maintenance of LRT 1, the extension project, the automated fare collection system and the common station in Trinoma in Quezon City. It will be in a unique position to dictate fares and everything else related to running the train system.
“To clarify, we are not against the LRT 1 extension to Cavite. We are against the onerous contract that places private interests above public good. LRT 1 will be run no different from Maynilad and Manila Water, no different from Smart and Globe. The Aquino government has once again displayed utmost insensitivity toward the commuting public.
We call on commuters to oppose the privatization deal and any impending fare increase.
We call on the government to disclose to the public the terms and conditions of the concession agreement,” Bayan said.