Press Release
May 8, 2011

Winning MRT-LRT bidder to get P15B, tax breaks & fare hike option

Sen. Ralph G. Recto yesterday asked government to be forthright to the Filipino people by disclosing that the P15 billion price tag for the privatization of Metro Rail Transit-Light Rail Transit (MRT-LRT) is actually a 'pay-out' to the winning private bidder and not the other way around.

"The people, before any translation is lost, should be informed that the P15-billion price tag for the bundled MRT-LRT privatization is the amount that government will pay to the winning bidder and not the amount that it would earn from the transaction," Recto pointed out.

The senator said this simply means that the first project under the Public-Private Partnership (PPP) program would instantly cost the government some P15 billion, instead of deriving fresh revenues from its decision to let go two crucial mass transport rail systems.

Recto, who chairs the Senate ways and means committee, said the P15 billion would be paid by government to the winning bidder, which would operate and maintain the MRT-LRT lines.

"We will pay them P15 billion to operate the rail lines plus perhaps they would avail tax holidays, cheap loans from state banks and an almost sure option to jack up fare prices," he said.

Recto nevertheless said under the O&M contract (operate and maintain), the winning private operator is not obligated to pour in new money in terms of additional rolling stocks or coaches and rail infrastructure.

"If such is the case, this will give the PPP project a bad name. Later on, pag ganyan ng ganyan, aayaw ang tao dyan at magagalit sila," he pointed out.

The senator said Palace economic managers may justify the P15 billion 'pay out' to the private operator if compared to the almost P7 billion to P8 billion that government shells out in yearly fare subsidies to maintain low fares for MRT riders alone.

"The P15 billion 'pasalubong' to the winning private bidder may be justified but the prospect of commuters eventually paying higher MRT-LRT fares negates such justification," Recto said.

He said the PPP auction of the MRT-LRT lines should redound to cheaper fare rates since the PPP dictum should be "race to the bottom (lower fares), not race to the top (higher fares)."

Recto also said such imminent fare hikes in MRT-LRT would be unfair to taxpaying commuters while jeepney and tricycle drivers are getting direct subsidy through the government's 'Pantawid Pasada' program.

The government has slated the bidding for the MRT-LRT contract on July 11 with at least eight big groups landing in the short-list of the Department of Transportation and Communications (DOTC), out of the 44 companies that have expressed interest in the project.

The winning bidder will get to operate and manage the two rail lines that would be integrated eventually for four years, with an option to extend by another year. LRT-1 runs along Taft Avenue from Baclaran in Paranaque City to Roosevelt-Munoz, Quezon City.

The MRT, meanwhile, runs from Taft Avenue in Pasay City to North Avenue in Quezon City.

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