MRT Buyout and a Few Related Issues

Heading: MRT Buyout and a Few Related Issues

The Department of Transportation and Communications (DOTC) has recently approved the fare hike for Metro Rail Transit and Light Rail Transit. So despite all the complaints passengers have about insanely long queues and poor services from both transport companies, they should be prepared for higher fares starting the 4^th of January 2015. Transportation Secretary Joseph Emilio Abaya issued Department Order No 2014-014, which sets the new fares for the three major mass transport system in the country.

Abaya said, “It’s a tough decision, but it had to be made. It’s been several years since an increase was proposed. We delayed its implementation one last time until after the Christmas season. While 2015 will see increased fares, it will also see marked improvements in our LRT and MRT services.”

The DOTC’s plan to adopt a uniform distance-based fare scheme for MRT-3, LRT-1 and LRT-1 has been decided in line with the government’s Medium-Term Philippine Development Plan.

Abaya added, “It is envisioned that this fare scheme will result in an equitable distribution of government funds currently dedicated to subsidizing the operations of the above rail lines in Metro Manila to much-needed development projects and relief operations in other parts of Luzon, the Visayas and Mindanao.”

In May 2011, the LRTA board approved a formula that will fix a rate of Php11 base fare, plus Php1 per kilometer, which will be charged to MRT and LRT passengers. In July last year, the proposed hike in fares was revived when President Benigno Aquino III said in his 4^th State of the Nation Address that it is high time for the implementation of such fare increase. Hence, using the same formula that was approved in May 2011, passengers taking the 17-kilometer MRT-3 from North Avenue, Quezon City to Taft Avenue, Pasay City, and vice versa, would have to pay Php28 for stored value and single journey tickets from the current fare of Php15. MRT-3 fares were originally set to Php17 to Php34 when the mass transit system started operating in 1999. These were then reduced to Php10 to Php15 from Php12 to Php20 in 2000.

Passengers on LRT-1 from Baclaran to Monumento, on the other hand, will be charged Php30 for every single journey and Php29 for stored value tickets from the current Php20 base fare. Likewise, LRT-2 passengers taking the route from Recto Avenue to Santolan will be charged Php24 for stored value and Php25 for single journeys from the existing base fare of Php15.

The last time the government raised the mass transit fares for LRT-1 to Php15 was in 2003, while LRT-2 fares have remained the same.

According to Abaya, due to the failure to match fare adjustments with increasing operating costs brought about by inflation, there was a break-even of finances for all three transit lines. He said, “In turn, this crippled their ability to invest in large-scale improvements for their facilities, since revenues have only been enough for day-to-day operational requirements.”

Abaya added that an estimated Php2 billion would be made available for development projects and relief operations in other parts of the country, since around 60 percent of the cost for each LRT-1 and LRT-2 passenger and about 75 percent of each MRT-3 passenger are subsidized by the government. The Transportation Secretary pointed out that the government pays around Php10 billion every year for the subsidizing of the MRT and LRT operations.

“I’m referring to the vast majority of Filipinos outside of Metro Manila – those in other parts of Luzon, in the Visayas and in Mindanao, most especially those whose lives have been severely affected by typhoons and calamities. They will be the real beneficiaries of a more equitable distribution of these savings.”

The estimated savings will be equivalent to 8,240 classrooms, 82 kilometers worth of farm-to-market roads or 11,440 hectares of irrigated farmlands, which will all be beneficial to the people.

The reported MRT and LRT fare hikes come amid the rollback in the minimum fare for jeepneys, from Php8.50 to Php7.50.

The government will pursue MRT buyout

Despite the Senate having reportedly denying funding for the MRT buyout, the Philippine government is said to pursue their plan in taking over the breakdown-prone MRT-3. Transportation and Communications Secretary Joseph Emilio Abaya told the STAR, “The takeover-buyout plan is still an option, which I and Budget Secretary Butch Abad and Finance Secretary Cesar Purisima will pursue. That is our mandate from President Aquino.”

Abaya also added that the said government buyout of MRT-3, which is the transit line along EDSA, is “still the most advantageous arrangement for riders and taxpayers.”

“Some people are out to derail this plan because they want to continue making money,” Abaya said this without elaborating and naming names. He also added that he does not have any idea how the takeover-buyout option could push through. Referring to Abad and Purisima, Abaya added, “We still have to discuss and flesh this out.”

Abaya however added that the Php6 billion allocation – part of the Php54 billion the House of Representative has included in the Php2.606 trillion national budget for 2015 – for the purchase of the remaining bonds of MRT Corp (MRTC) could be the solution to pursuing the takeover-buyout plan.

However, the Senators eliminated the bulk of the Php54-billion appropriation and retained only a small part, which included the Php6 billion intended for purchasing the remaining 15 to 16 percent of the MRTC bonds that were floated by private investors who built the EDSA transport system.

The only state banks – Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP) – are the only financial institutions that hold more than 80 percent of the MRTC bonds, controlling the corporation that owns the MRT-3.

Isabela Congressman Rodolfo Albano III, who is among the few who supports the planned MRT takeover said that if the government is able to buy all of the MRTC bonds, they will have ownership of the EDSA rail line and have free rein in rehabilitating the transit system without any interference from other private investors. He said, “The private investors claim that the government, by holding MRTC bonds, owns only economic interests, including revenues, while they, the investors, have ownership rights over the system that produce such revenues. To me, economic rights and owner- ship rights are one and the same thing, because when the contract between the government and private investors end in 2015, both of these rights and interests will accrue to the state. By then, the state will own the system,” he added.

Rep. Albano also said that private investors would have no stake at all in MRT-3 after the contract expires, regardless of how they try to distinguish the differences between economic and ownership rights.