A member of the House Committee on Transportation has called for a review of the concession agreement entered by the Department of Transportation and Communications (DOTC) and the Universal LRT Corporation (ULC) for the construction of the P63.14-billion Metro Rail Transit (MRT) 7 project.
In House Resolution No. 926 filed by Kabataan Partylist Rep. Terry Ridon today, the legislator asked Congress to take particular regard to the arrangement on return of equity, the proposed fare scheme, and the “socio-economic impact” of the project especially on families that will be displaced due to its construction.
The MRT-7 project involves the construction of a 44-kilometer light rail transit route and road project that spans Quezon City, Caloocan City, and Bulacan.
The 25-year concession agreement gives ULC, a business entity partly owned by San Miguel Corporation, the sole right and obligation for the development, financing, operation and maintenance of the mass railway transit project that will undergo the “Build-Gradual Transfer-Operate and Maintain” (BGTOM) scheme.
The rail component of the MRT-7 project involves the construction of a 22.8-kilometer rail transit system that is envisioned to operate 108 rail cars in a three-car train configuration, with a daily passenger capacity ranging from 448,000 to 850,000.
Despite being signed back in 2008, the MRT-7 project’s implementation was delayed for five years due to the failure of the proponent to secure a performance undertaking (PU) – a financial guarantee on part of the national government which is a requirement for financial closure of projects to be funded by official development assistance – from the Department of Finance (DOF).
Last month, the DOF announced to the media that it has already endorsed the MRT-7 project to President Benigno Aquino III for approval and will also issue a PU before the first quarter of 2014 ends.
After the president’s approval, the issuance of the PU, and subsequent financial closure for the project, ULC can then immediately proceed with the commencement of the project, which is estimated to be completed within 42 months.
MRT-7 is set to have 14 stations, starting with the North Avenue Station in EDSA, passing through Commonwealth Avenue, Regalado Avenue, and Quirino Highway up to the proposed Intermodal Transport Terminal in San Jose del Monte, Bulacan.
The road component of the project, meanwhile, involves the construction of a six-lane access road from San Jose del Monte to Balagtas, Bulacan North Luzon Expressway Exit.
Citing data from peasant organisation Kilusang Magbubukid ng Pilipinas, Ridon stressed that the construction of the MRT-7 train line and the real estate commitments included in the project will displace more than 300 farmer-families in Tungkong Mangga, San Jose del Monte, Bulacan, and will also displace another 40,000 residents in Tala and Pangarap Villages in Caloocan City.
“Despite this, no clear plan of action for the affected families is presented by the proponents of the project,” Ridon said in HR 926.
Meanwhile, the youth lawmaker also questioned the net revenue sharing presented in the concession agreement.
In a recent congressional briefing, DOTC revealed that during the 25-year concession period, ULC is set to receive 70 percent of net revenue while the government will get 30 percent if the return on equity in below 11.9 percent. Meanwhile, ULC and the government will get 50 percent shares each when the return on equity reaches the 11.9 to 14 percent range.
In the event that return on equity of the MRT-7 project breaches the 14-percent mark, the government will receive 100 percent of the net revenue.
“Such sharing of net revenue may prove to be disadvantageous to the government and the public in the long run, as it does not encourage optimal financial viability. With the percent share in the net revenue for ULC sharply falling upon reaching the 12-percent mark and above, the private concessionaire may strive to press down profits so as not to breach 11.9 percent return on equity, thereby resulting to loss of potential revenue for the government,” Ridon explained.
Fare scheme questioned
In the same congressional briefing, DOTC also revealed that the proposed fare for a full 14-station single journey in the MRT-7 from North Avenue to San Jose del Monte, Bulacan amounts to P38.00 for the first year of operation, increasing at a 5-percent rate per annum for 25 years.
“Under such rate, the initial P38.00 will increase to as much as P128.68 by the time the concession agreement ends after 25 years. This is equivalent to a total of P90.68 or 238.63 percent overall increase in the MRT-7 fare in a span of 25 years,” Ridon said.
“Given the flaws in the equity sharing agreement and the fare schedule, and the lack of a comprehensive plan for families who will be displaced by the project, the MRT-7 concession agreement may prove to be an onerous deal that would only burden the Filipino people in the long run,” Ridon explained.###