Gov’t to subsidize LRT-1 Cavite rail project

MANILA, Philippines – The government will likely be subsidizing the operations of one of the Aquino administration’s biggest infrastructure project: the Light Rail Transit Line 1 (LRT-1).

This was according to Transportation Secretary Joseph Emilio Abaya who in a press briefing on Monday, October 21, explained that the project’s concession terms had to be overhauled after private sector bidders snubbed them in August.

The 5 major issues addressed in the revised concession terms will mean the government has agreed to shoulder the following:

• the real property taxes estimated at about P2 billion
• the difference in the sudden spike in power rates
• warranty on the infrastructure
• the 5% increase in fare prior to the completion of the project

The 5th issue was about allowing the bidders to submit a negative bid, which means the private sector will carry all the risks involved in the project in the duration of the concession agreement.

“The regulatory risk is passed on to the government because we are in a better position to handle regulation. The market risks remain with the concessionaire,” Abaya explained.

The government would also guarantee the structural integrity of the extended LRT-1 line all the way to Cavite.

The proposed changes have been presented to the National Economic and Development Authority-Investment Coordination Committee (NEDA-ICC) and are awaiting the approval of the NEDA Board chaired by President Benigno Aquino III, Abaya said.

In 2010, when the Aquino government first announced its flagship public-private partnership (PPP) scheme for infrastructure projects meant to support the country’s growth, officials said the public sector will not spend for these projects.

Back to square one

“Essentially we start from scratch,” Abaya said reiterating that the prequalified bidders would have to join the prequalification procedures.

Aside from the 4 prequalified as well as two disqualified bidders, the DOTC chief said several foreign and local firms have expressed interest in the project

“It is our obligation to maximize competition and to get the best that the world could offer,” he added.

According to him, the DOTC would publish the invitation to bid as early as November, and the deadline for the submission of bids would be some time in the first quarter of 2014. (READ: LRT-1 Cavite project re-bid in 2013 not 2014 — Abaya)

Similar to LRT-1 extension project, the P17.5 billion Mactan Cebu International Airport and  the P1.72 billion MRT Automated Fare Collection System also suffered delays in the bidding process as auction schedule for  both projects were moved from August to November after a major overhaul of the concession agreement was made. (READ: Gov’t defers another PPP project)

This LRT-1 project will extend the existing line from 20.7 kilometers to 32.4 kilometers, opening up the rail services to the nearly 4 million residents of Parañaque, Las Piñas, and the Province of Cavite.

The government has set aside P30 billion to acquire up to 39 new Light Rail Vehicles for this project.

The government is bidding out the construction of the tracks, the stations and all its attendant facilities, as well as the operations and maintenance works. these are worth about P30 billion.

The other half of the P60-billion project, which includes the purchase of the coaches, would come from the government through official development assistance (ODA). – Rappler.com