THE first marching order of the newly-elected President should be the outright rejection of a demand of an Ayala-controlled firm to increase the fare of the Light Railway Transit Line 1 (LRT 1), according to the independent research group Ibon Foundation Inc.
In a statement, Ibon said President Benigno Aquino 3rd’s successor should also rescind a
Public-Private Partnership (PPP) concession agreement between the Aquino administration and the Light Rail Manila Corp. (LRMC) for the operation and maintenance of LRT 1 aside from the fare hike that the LRMC requested last Friday.
The LRMC is a consortium of Ayala Corp. (controlled by the Ayala family), Metro Pacific Investments Corp. (headed by Manuel V. Pangilinan) and Australia’s Macquarie Infrastructure Holdings.
IBON said even if the fare raise sought by the LRMC was rejected, “the deficit payment scheme would still entail a fare hike as per the PPP concession agreement, which obliges the government to pay for the private operator’s lost revenues.”
It added that the fare increase is baseless and unnecessary.
Regulators first allowed LRT 1 along with LRT 2 and Metro Rail Transit Line 3 (MRT 3) to jack up fares in January 2015.
IBON found that the fare box ratio of LRT 1 was pegged at 1.18 in 2014 and the box ratio had increased to 1.63 from January to May this year because of the initial fare hike.
A fare box ratio of 1.0 means that the current fare matrix is enough to cover for the daily operation and maintenance of the train system.
IBON said “the privatization of LRT 1, through PPP, has made the mass transport system profit-oriented.”
“The concession agreement between the Aquino government and the private operator guarantees the latter profits, thus allowing it to regularly impose higher fares in order to meet its expected commercial income, it added.
IBON explained that “the deficit payment is actually just one of the many generous perks that the Aquino administration gave to the LRMC.”
Of the P64.9 billion total project cost of LRT 1, the administration has already shouldered around P34.9 billion or 54 percent of the total costs.
That is aside from the P64 billion in foregone public revenues arising from the LRMC’s exemption from paying real property taxes.
The government also agreed to compensate the consortium if the former fails to comply with its contract obligations.
Less than a year into the 32-year concession agreement, the LRMC is already billing the government some P1.8 billion in compensation for its failure to deliver, among others, the agreed 100 Light Rail Vehicles (LRVs) upon the LRMC’s takeover last year.
Ibon described the LRMC-Aquino administration PPP deal as “onerous and grossly disadvantageous” to the government and the train system’s more than 419,000 daily commuters.
The LRMC is invoking its PPP contract with the Aquino administration for a fare hike of as much as 10 percent that it expects to be implemented by August.