LRMC counts cost of delay in gov’t approval of LRT-1 fare increase
LIGHT RAIL Manila Corp. (LRMC), the private operator of the Light Rail Transit Line 1 (LRT-1), said it has incurred a “fare deficit” of about P100 million for the three quarters of 2018 due to the government’s delay in granting its fare hike petition.
“Our agreement calls for compensation of the… If the fares are at a certain level and it’s not raised, it’s in our agreement, what we call a ‘fare deficit’… (For 2018), there’s a P100 million difference in the revenue that we should have been getting with the increased fares versus what we got,” LRMC President and Chief Executive Officer Juan F. Alfonso told reporters on Friday.
LRMC applied for a P5 to P7 increase in LRT-1 fares last March — the second time it did since the company was awarded the contract to operate the train line in 2014. The Department of Transportation (DoTr) has yet to approve the petition.
The consortium of Ayala Corp., Metro Pacific Light Rail Corp., Metro Pacific Investments Corp. (MPIC) and Macquarie Infrastructure Holdings (Philippines) Pte. Ltd. started operating LRT-1 in September 2015, after it signed the P65 billion, 32-year concession agreement with the government in Oct. 2014. Based on the terms, LRMC is allowed to raise LRT-1 fares every two years.
The DoTr said in August LRMC’s petition was still under discussion, and would require a public hearing, before being approved.
Mr. Alfonso said even with the delays, the government has not paid for the fare deficits from the past years.
“We haven’t been compensated for fare deficits,” he said. “The mechanism in the agreement is for fare deficit or for fare increase. For fare increase, it is paid per user. So if I live in Manila, Makati or Pasay and I use the system, I pay for it. For fare deficit, then it’s taken… from DoTr (budget),” he explained.
Despite this, Mr. Alfonso noted LRMC is still making “a little bit of money,” but just enough to keep the system running.
LRMC allocated a capital expenditure of P7.5 billion for the rehabilitation of the train system, structural rectification and an extension of the line to Cavite.
Mr. Alfonso said they have already spent about P12 billion as of end-November. The capex budget is expected to shift starting next year to focus on the Cavite extension.
He said construction of the LRT-1 Cavite extension is expected to commence by first half of 2019, as substantial right of way was already granted for the first of three segments of the extension.
The 11.7-kilometer extension that will build eight new stations from Baclaran to Bacoor, Cavite is seen completed by late 2021 or early 2022. Mr. Alfonso said the difficulty in relocating posts of Manila Electric Company (Meralco) was the cause of delay.
“We’re still assuming the same costs… Later on, if some of these things have delays and increased costs, then there’s a mechanism in our agreement to deal with it… There’s going to be escalations in costs,” he added.
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