LRT Line 1 fare hike to follow privatization, activist groups warn

Published October 6, 2014 6:59pm

Commuters riding the Light Rail Transit Line 1 (LRT-1) should brace for a fare increase now that the government has awarded the P65-billion LRT-1 Cavite Extension Project to the Light Rail Manila Consortium (LRMC), a party-list and a militant group said Monday.

Bayan Secretary General Renato Reyes Jr. described the takeover of the LRT-1 by the consortium of the Ayala Group and businessman Manny Pangilinan’s Metro Pacific Investments Corporation (MPIC) as a “truly onerous” deal that was sealed after the Department of Transportation and Communication (DOTC) guaranteed the Ayala-Pangilinan group could hike fare prices.

“The fare hike is a certainty and the winning bidder is now asking for its implementation,” he said in a statement.

The Light Rail Transit Authority (LRTA) had earlier approved a new fare matrix for the LRT-1 that would increase the maximum fare from P20 to P30.

Fixed increase matrix based on inflation

Transportation Secretary Joseph Emilio Abaya, however, said LRMC can't increase the fares unilaterally.

"Clear key performance indicators and sevice standards shall be adhered to by the concessionaire and which government will be watching over. Private concessionaire cannot increase fares unilaterally. The fixed matrix is part of the agreement," Abaya said in a text message on Monday night.

"The fare matrix has been fixed following the P11 plus P1 structure, with an increase approximating inflation yearly. If government decides not to impose it, there is a top up provision that kicks in. Market risks remains with the private concessionaire while regulatory risks is with the government," he added.

Abaya during the signing of the deal last week said the extension would bring much needed transportation services to people living south of Metro Manila and in nearby provinces.

"This extension took over a decade to be planned, approved and tendered out. Having made it to this point, the DOTC is committed to the infrastructure development of this country," Abaya said during the signing of the contract last week.

Ayala Corporation COO Fernando Zobel De Ayala said the signing signaled the start of long and difficult work ahead to extend the 20-year-old rail system to nearby provinces by 2019.

"The LRT Line 1 is a vital component of our city's transport network that will help ease the pressures brought about by the increasing development around the city," Ayala said.

"As we assume the responsibility for the operations of the train line next year, we hope to be able to deliver in due time a much improved riding experience that is safe and efficient for our daily rail commuters," he added.

'Smokescreen'

Bayan Muna party-list Rep. Neri Colmenares said the impending LRT-1 fare hike proves the Aquino administration’s flagship public-private partnership (PPP) program was a smokescreen for the privatization of public utilities.

“As expected, the ink has hardly dried with the signing of the LRT1 extension and a fare hike is immediately at the offing. The winning bidders are again the MPIC-Ayala group and they are saying that the fare hike is a crucial bank requirement to lend them money for the P65 billion project.... [but] the cost [will be] again passed on to commuters ” he said in a separate statement.

Colmenares said that based on a study of the LRT-1 privatization by IBON Foundation, the government assured the MPIC-Ayala group it could impose higher fares, with the concession agreement stating the private concessionaire is granted an initial notional fare by August 2014.

The initial notional fare is a boarding fee of P12.13 plus a distance fare of P1.10 per kilometer.

“This provision will result in an increase of fares up to 101.7 percent per trip depending on the route,” the lawmaker claimed.

Aside from this, Colmenares said the agreement also allows LRMC to have periodic adjustments in the notional fare starting August 1, 2016. The consortium is allowed to increase the fare by 10.15 percent every adjustment period of two years.

The notional fare can also be hiked by five percent upon completion of the extension line to Niyog station in Bacoor, which is estimated to take three years.

On top of this, the agreement also allows to adjust notional fares automatically according to inflation rates every four years starting from 2018 onwards.

Other increases that are supposedly in the contract include another five-percent hike upon completion of construction of the extension, a programmed periodic adjustment of some 10 percent every two years; and a pass-on of power cost fluctuations up to five percent of the notional fare.

The agreement also contains a provision stating the government would pay P34.9 billion or more than the half the of the total project cost of P64.9 billion of the LRT-1 extension project for right of way acquisition, purchase of coaches and civil works.

The contract likewise provides LRMC an additional P5 billion subsidy of “viability gap funding” and the privilege to pay the premium in tranches—10 percent up front and the rest in a quarterly basis after five years.

For the progressive lawmaker, the provision means LRMC will benefit from the lower borrowing costs from the government, including from the official development assistance (ODA).

“The [agreement] also contains a mechanism assuring Light Rail Manila that it will be able to collect the notional fare if the approved fare is lower. Which means the government will pay a ‘deficit payment’ to cover the gap. This is a regulatory risk guarantee and the consortium never had it this good but at the expense of commuters,” Colmenares said.

He vowed Bayan Muna will “exhaust all means” to ensure commuters will not suffer from the impending LRT-1 fare hike. — NB/ELR/JDS, GMA News

Tags: lrt1extensionproject, bayan, bayanmuna, josephemilioabaya, ayalagroup