With planned MRT, LRT fare hike, public to ‘subsidize’ profits of private concessionaires – RILES Network

Citing financial statements culled from past public consultations with DOTC and train operators, RILES Network said the real cost of a single ride ticket, which already covers the maintenance and operation, is only P9.50 ($0.21). What the government has been “subsidizing” is the difference between the current fare and the P60 ($1.35) per passenger fare it guaranteed to private concessionaires.


MANILA – Consumer groups are still waiting for the public consultation by the Department of Transportation and Communication (DOTC) on its proposed MRT and LRT fare hikes. Those consultations would likely be “mere publicity stunt,” the spokesman of RILES Network Sammy Malunes said weeks ago, but he said they would still push for it because the real stakeholders – the public – have to be heard, too.

Based on government pronouncements, the MRT-LRT fare hike is “already approved,” and as what Secretary Joseph Emilio Abaya said last June, only the amount and how it would be broken down for this year and the next are to be tackled in consultations. But the scheduled consultation on Aug. 22 did not push through. Various groups opposing the hike had submitted to the DOTC their position against the planned hike.

Various leaders of sectoral and consumer groups vow to continue holding mass actions against LRT-MRT fare hike, privatization (Photo by M. Salamat / Bulatlat.com)
Various leaders of sectoral and consumer groups vow to continue holding mass actions against LRT-MRT fare hike, privatization (Photo by M. Salamat / Bulatlat.com)

Riles Laan sa Sambayanan (Riles) Network said their group will be joined by other progressive associations such as “#StriketheHike Movement, Kilusang Mayo Uno, Anti-Trapo Movement, Kadamay, and Pinag-Isang Samahan ng mga Tsuper at Opereytors Nationwide (Piston) in showing disapproval of the mass rail systems fare hike.

In an interview Wednesday, Malunes reiterated also their group’s long-standing demand for an impartial investigation of privatization contracts signed by the government. Vencer Crisostomo, chairman of Anakbayan, had previously said in an earlier press conference that an investigation is required “especially since all privatization contracts entered into by the government have made prices of services too expensive,” while private corporations reap above average profits. Groups protesting the latest planned fare hike connect this to past and current privatization schemes involving the country’s mass rail system.

The riding public of MRT and LRT is 65 percent workers and 35 percent students. Without decent wage hikes for years, the government-planned fare hike would be a big burden to the riding public, said Doods Gerodias of ADLO-KMU.

MRT-LRT fare hike tied to privatization or PPP plans

The Aquino government plans to acquire a $-1 billion loan for the MRT 3 railway system, expand the LRT 1 and 2 train systems for P60 billion ($ 1.35 b) each, and impose a fare increase of P5 ($ 0.11) this month and another P5 next year when these are privatized, Transportation and Communications Secretary Joseph Emilio Abaya said in a DZBB interview last June. He said the 10-peso ($0.22) fare increase was needed to finance, expand and upgrade the train systems.

The $1 billion funding (for MRT 3, plus purchase of 48 more coaches) will come from concession loans with Official Development Assistance funds of other governments at three percent interest annually, Abaya reportedly said. He also disclosed that “President Aquino has already approved the $1-billion loan. In fact, he has already issued an Executive Order to this effect.”

Incidentally, in connection with the planned purchases for MRT, a presidential sister has been accused by officials of the Czech Republic of having asked for bribes to secure the purchase order.

With regard to the P60-billion ($ 1.35 b) each for LRT 1 and 2, the government would spend P30 billion ($ 673.4 million) to be sourced from ODA funds and they expect the private sector to finance the rest, Abaya had said. “The government will own everything, but the private sector will take over the operation and maintenance of Line 1 for a concession fee. For Line 2, the government, through the ODA, will build stations and do the civil works,” Abaya reportedly said.

Abaya assured the public that the arrangement with private companies, or privatization, would not result in steep fare hikes.

But according to RILES Network, through its spokesman Malunes, Filipinos have actually been losing out big time as a result of such public-private arrangements. Similar to what happened in water and power privatization contracts, Malunes said private companies in MRT and LRT are benefiting hugely through guaranteed profits while the public pay for the loans incurred to build it, including its interests, and the cost of operation and maintenance.

As such, if not for the profit-taking, the country’s mass railway system would have generated savings, after years of operating, that it can use to invest more for upgrading or expanding.

In citing the first of their five reasons why the public is justified in protesting fare hikes, RILES Network said “The MRT and the LRT earn sufficient income to maintain, improve and expand operations.”
Citing financial statements culled from past public consultations with DOTC and train operators, Malunes said the real cost of a single ride ticket, which already covers the maintenance and operation, is only P9.50 ($0.21). As such, collections exceeding this amount “go directly to profits.” MRT and LRT tickets are priced up to P15 and P20 ($0.34 to $0.45).

‘Public subsidizing profits of a few’

“It is not true the government is subsidizing the MRT,” Malunes said in a press conference. He said the so-called subsidy which the government has been complaining about for years now, especially during budget deliberations, is actually only going to private operators. Basing his assertions on financial statements the RILES Network got from the DOTC and MRT operators, Malunes said the busy railways are actually financing its own operations – and that in fact, if it wouldn’t have to produce guaranteed profits, it can actually finance its own expansion and other improvements.

But the trains’ revenues that could have made train fares more affordable and comfortable now are being pocketed instead by private groups, particularly in MRT, said Malunes.

LRT is still publicly owned. The privatization of its operation, maintenance and expansion is still being auctioned off to this day. LRT, according to Malunes, is now showing healthier financial performance as it has already paid off the loans incurred to construct it, after 30 years.

MRT, meanwhile, is constructed via a build-operate-transfer scheme, and the private consortium that undertook it largely funded it with loans guaranteed by the government. In 2009, under Arroyo, the government paid in lump sum the loans incurred for MRT, which then had doubled to $800 million from the original principal of $416 million, Malunes said. The private concessionaires defaulted in payment, citing “losses” because the government failed to reinforce the agreed upon fares.

“The government guaranteed a fare of P60 ($1.35) per passenger to private concessionaires, but they were obliged to lower it,” Malunes recalled. Still, he said, the MRT earns more than enough because the estimated 350,000 passengers per day when it started operations have more than doubled. “But because government is tied to the contract fare of P60 ($1.35), the difference is being paid for by the government,” Malunes said.

The private concessionaires shelled out only P4.4 billion ($98. 8 million) from their own pockets, he said. Receiving P5.2 billion ($116.7 million) every year for 12 years now (of the 25-year contract), they have reaped much profits already at the public’s expense, Malunes said.

Groups such as the RILES Network are now calling for the abrogation of that contract, to rechannel the P5.2 billion ($116.7 million) yearly “subsidy” for the trains’ needs.

“The government is behaving like a huge corporation. Service is not its viewpoint but how to profit from the people,” Malunes said in a press conference.

For progressive groups opposing the planned fare hike, that profit-oriented concept in a public service like the railways is utterly wrong. “We should ask the people to pay only for what is the real cost,” Malunes said. And that cost is only P9.50 ($0.21), based on the financial statements of train operators, he said.

“The excess or profits go to private hands – of Henry Sy, Ramon Ang, Danding Cojuangco, Manuel Pangilinan, the Lopezes. The contract that allows for that is allowing the collusion of the rich against the poor,” Malunes said.

Crisostomo of Anakbayan added that cases like those in the country’s mass railway system are “as worse as the pork barrel scam, and this includes the government’s guaranteeing the loans incurred by private consortiums, approving above average guaranteed returns, etc.

Mounting pressure

Despite protests and calls for contract abrogation as well as investigation, the Aquino administration is still continuing to bid out the LRT, including its expansion plans, to private consortiums. They are marketing it as part of government’s priority PPP (Public-Private Partnership) projects. In the face of protests that have stalled the implementation of fare hikes, three of four pre-qualified firms backed out of the LRT-1 auction last week, citing “risks.”

The sole bidder who remained, the joint bid of the Ayalas and the business group headed by Manuel Pangilinan, reportedly attached conditions to its proposal. Reports said that among the many issues, the crucial one is the “low” fare.

With the failed auction, the Joint Foreign Chambers of Commerce has also warned the Aquino government this week against further delays to mass rail projects. Asked about it, Malunes told Bulatlat.com that any bidding involving the MRT and LRT should take into account the riding public and the people in general, or the “real stakeholders.” He said those foreign representatives of big business should refrain from intervening and dictating on the country’s business affairs.

The people, Malunes said, don’t have to answer to those conditions that include increasing fares and assuring as much as 15 percent rate of return on investment. “It is the people who pay for the construction and maintenance of the railway system,” Malunes said. He and leaders of other progressive groups reiterated the need for public utilities such as the railways to be “fully controlled” by government. (https://www.bulatlat.com)

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