Press Release
February 7, 2011

Amid $1.1B offer for MRT-3
No more justification for fare hike

Sen. Ralph G. Recto yesterday said with the private sector showing keen interest in the operation of Metro Rail Transit (MRT)- 3, the government has lost justification for increasing the fare rates in the railway system found along Edsa.

Recto stressed the government should scrap its planned fare increase while pushing ahead with the privatization of the MRT system.

"The more prudent thing to do is to scrap the planned fare hike while the MRT privatization takes its course, possibly with the speed of a bullet train sans train wrecks," he said. "Cancellation and not suspension of the fare increase should be adopted by the DOTC," the senator added.

The Department of Transportation and Communications (DOTC) announced over-the-weekend that it was suspending indefinitely the planned fare hikes for the MRT and the Light Rail Transit (LRT)) systems amid growing opposition from various sectors.

But Recto said the offer of Metro Pacific Investments Corp. (MPIC) led by businessman Manuel V. Pangilinan to buy the government's stake in MRT-3 is one glaring proof that a fare increase could be avoided through a successful privatization.

"Now that a corporate "white knight" in the person of Pangilinan has come out first to rescue MRT-3, government should push ahead with the privatization and pick a new private operator soon," Recto, Senate ways and means chair, said.

The Pangilinan group has offered a $1.1-billion purchase price for MRT-3, promising to temper their profit goals and doubling the capacity of the railway system to 700,000 passengers a day while spending another $300 million to make the system more efficient.

Recto said while the sale of the government's stake in the MRT-3 has to go through open public bidding, it was clear that there are serious takers from the private sector as shown by the offer of the Pangilinan group.

The senator stressed the government could forego increasing MRT's fare since a new private operator will soon take over.

The government, he said, came up with the fare hike to stop the rail system's supposed losses for subsidizing the fare of passengers.

Recto stressed relinquishing control to the private sector would instantly mean savings of P7 billion in state subsidies this year from an average of P5 billion during the previous years. "Unless the MRT fare hike is the government's 'pasalubong' to the winning bidder, any fare increase now would appear as a sell-out and uncalled for," Recto said.

He added: "We may have a situation wherein the government imposes a fare hike now and the private operator later."

But should the MPIC bag the MRT-3, the senator said the new operator need not raise fare prices since it could expect a good revenue stream with the doubling of the trains' capacity. "MPIC just by doubling capacity of the MRT 3 could easily earn moderate profits without adjusting the current fare prices," Recto said.

Recto said MPIC is even willing to accept a lower rate of return on its investment as long as government extends the build-operate-transfer contract by another 15 years to 2040 to make the MRT-3 financially viable.

The MRT-3 currently has a capacity of 350,000 passengers daily, way below its programmed capacity of 600,000, which was blamed in part to the lack of sufficient rolling stocks or train coaches.

MPIC has offered to buy the government's stake in the MRT-3 , through state banks Land Bank of the Philippines (LandBank) and Development Bank of the Philippines (DBP), to the tune of $1.1 billion or roughly about P45 billion.

MPIC was earlier given control over a 29-percent stake in MRT Corp. by the block's owner, Fil-Estate Corp. of businessman Robert John Sobrepeña.

The government has approved, even before public consultations are held, new fare rates for MRT and Light Rail Transit (LRT) systems with commuters of the EDSA railway paying a minimum fare of P15 from the current P10 and P30 from the current P15 for end to end destination.

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