PUV modernization seen costing P198 billion over 3 years

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The cost of modernizing the country’s public transport fleet of jeepneys at some P66 billion a year over three years is just too much for the operators to shoulder alone, the umbrella group Kilusan sa Pagbabago ng Industriya ng Transportasyon (Kapit) said.

As a result, Kapit asked the Insurance Commission to allow nonlife insurance companies to extend to their members financial assistance in the form of a loan for the purchase of so-called Euro-4-compliant vehicles or environment friendly e-jeepneys envisioned under the Public Utility Vehicle (PUV) Modernization Program of the government.

Kapit told regulators the group have discussed the proposal with several insurers who all expressed willingness to “explore ways to make motor car insurance products more affordable”.

“Kapit manifested that the modernization program will require huge amount of funding. In order for jeepney operators to avail themselves of new vehicles, Kapit is proposing that insurance companies be allowed to extend loans to jeepney operators. With this proposal, jeepney operators will have more options on where to source the funding for the acquisition of new vehicles,” Insurance Commission (IC) chief Dennis B. Funa said.

As consequence of that proposal, including that lowering premium payments under the PUV Modernization Program, Funa said he asked the influential umbrella group Philippine Insurers and Reinsurers Association Inc. (Pira) to comment.

“Based on the initial comments from Pira, its members expressed their willingness to lower the premium to be collected from jeepney operators but subject to compliance with the minimum tariff rates imposed by the IC,” he said.

He clarified that insurance companies offering motorcar insurance products must observe the minimum and maximum premium rate. This means insurance companies cannot charge premium below the premium rate imposed by the IC.

At present, the basic rate for loss or damage insurance cover is 1.5  percent to 2.0 percent of the value of the motor vehicle while the premium for acts of nature is subject to a minimum rate of 0.50 percent of the value of the motor vehicle.

“Based on the letter of Kapit, the PUV Modernization Program will need P66 billion a year for the next three years. Hence, their proposal to the insurance industry will help reduce the costs of this program on the part of jeepney operators,” Funa added.

In June the Department of Transportation (DOTr) launched the PUV Modernization Program that seeks to provide safe, comfortable and environmentally sustainable modes of public transport for commuters.

The program aims to phase out old and dilapidated jeepneys and replaced by units that are either powered by Euro 4-compliant engines or electrically powered with solar panels roofs, among others.

Earlier, Finance  Undersecretary Karl Kendrick T. Chua said in the wake of the signing of the Omnibus Franchising Guidelines (OFG) under the PUV Modernization Program by the DOTr and the Land Transportation Franchising and Regulatory Board (LTRFB), the next step was the study on route-rationalization.

The Department of Trade and Industry (DTI) also said it is drafting designs for a prototype of a modern jeepney dubbed the “Philippine Utility Vehicle”. Under the program, PUVs over 15 years of age will be phased out and replaced with vehicles with low-carbon footprint using low-emission technology.

The new design is seen to accommodate at least 22 passengers, with the entrance moved from the rear to the right side of the vehicle and providing front-facing seats with seat belts.

Department of Finance (DOF) calculations show some P8 billion will be needed as equity subsidy contribution from the DOTr just to purchase the new and safer modes of PUV transport down the line.

The DOF also said some P2.2 billion worth of subsidized purchases have been approved since February this year involving 28,000 jeepneys worth more or less P80,000 each.

Image credits: Nonie Reyes

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