The government did not leave the proposals of the private sector to modernize the Metro Rail Transit (MRT) Line 3 unattended to gather dust. It has simply rejected them for not being economically advantageous to the state.
Transportation Undersecretary Jose Perpetuo M. Lotilla said the government was not negligent of its task of replying to proposals to improve the line, stressing that it was in constant communication with Metro Pacific Investments Corp. (MPIC), which offered to upgrade the train system at no cost to the state.
He said the transport agency made it clear to the Manuel V. Pangilinan-led conglomerate that the government was not keen on the group’s offer. In fact, Lotilla said, the government sent a letter informing the infrastructure giant about the department’s decision.
He clarified that the holding firm was only explaining one side of the story when it said the government rejected a proposal that would essentially free the state from liabilities attached to the line’s contract.
“I wrote a letter to MPIC saying that we are not accepting their proposal. The problem is, they are explaining only half of their proposal, the other side of the story has not been heard,” he said.
The local flagship of the Hong Kong-based First Pacific Co. Ltd. earlier entered into a partnership agreement with the owner of MRT 3, which would allow the firm to invest $650 million to improve the services of the train system.
The venture would effectively expand the capacity of the railway system by adding more coaches to each train, allowing it to carry more cars at faster intervals. The multimillion-dollar expansion plan would double the capacity of the line to 700,000 passengers a day, from the current 350,000 passengers daily.
Aside from the $300-million proposal, the firm also offered the government $350 million for the acquisition of equity and some of the bonds issued by Metro Rail Transit Corp. (MRTC) .
The $650-million offer was presented twice to the Department of Transportation and Communications (DOTC) since the plan was birthed in 2011.
“But once they do that, they will then require us to pay a guaranteed fare, they will impose a tariff of fare which will have periodic increases. They are also asking us to increase the period of concession by another 15 years. Then, the government will still pay them a certain rate of return of somewhere north of 18 percent. Since there are guaranteed fares, and a shortfall occurs, the government will have to pay up the differential,” Lotilla explained.
“All these announcements of taking over the subsidy is just half of the story,” he lamented.
Lotilla said the government will continue to pursue the P53.9-billion buyout of the train system’s private concessionaire MRTC, which is owned by MRT Holdings
The takeover of the line will put an end to the ongoing arbitration case in Singapore between the government and the concessionaire. This will also terminate the concession agreement, and end the government’s obligation to pay billions of pesos in equity rental payments to MRTC.
Once the buyout is completed by 2016, the transport agency may then bid out an operations and maintenance (O&M) contract for the line, thereby tapping private-sector efficiency and customer service orientation for operational needs, while retaining regulatory functions for passenger protection with the government.
This venture, however, is opposed by the owners of MRTC.
Earlier, MRTH Spokesman David S. Narvasa warned the government of legal complications should it insist on taking over the train system without negotiating the terms with the “owners” of the facility.
He said the state could not advance the buyout by speaking only to the government nominee directors who are part of the board of MRTC. The official explained that pursuant to the Corporation Code of the Philippines, the state has no power to acquire MRTC without the consent of MRTH, which owns an 85-percent shareholding in the train system’s concessionaire.
The board of MRTC is composed of 14 seats, nine of which are occupied by government officials, headed by Chairman Tomas T. de Leon of the Land Bank of the Philippines.
LandBank and the Development Bank of the Philippines jointly own an 80-percent economic interest in MRTC by virtue of the bonds that the two state-owned banks bought from the concessionaire.
Since 2004, the train system has been operating at overcapacity. Currently, the line serves nearly 550,000 passengers per day, it even reached, at one point this year, the 650,000-daily passenger mark. It has a rated capacity of 350,000 daily passengers.