By Lorenz S. Marasigan | Business Mirror | February 14, 2015

THE long-drawn battle between the government and the owner of the Metro Rail Transit (MRT) Line 3 may soon end, after a senior official of the transportation department admitted that his office is currently weighing the proposal of the Sobrepeña-led company to invest more money in the train system in exchange for an extension of its contract.

Still, the government is taking extra precaution in considering the offer that would free the state from paying billions of pesos in equity rental payments to the company, which also proposed to overhaul the train line without a single centavo from the government.

“We’re studying it; we don’t want to say outright that we are in favor or against it. There are certain concerns, like fares,” Transportation Undersecretary Jose Perpetuo M. Lotilla said in an interview.

MRT Holdings II Inc. (MRTH-II) and Metro Pacific Investments Corp. (MPIC) are proposing to defray the upgrade costs of the train system and release the government from the bondage of paying billions of

pesos in equity rental payments.

The group of businessman Manuel V. Pangilinan, which earlier entered into a partnership agreement with the corporate owner of the MRT 3, intends to spend $524 million to overhaul the line.

The agreement would allow Pangilinan’s company to invest some $600 million to improve the services of the train system.

The venture would effectively expand the capacity of the railway system by adding more coaches to each train, allowing it to carry more cars at faster intervals. The multimillion-dollar expansion plan would double the capacity of the line to 700,000 passengers a day, from the current 350,000 passengers daily.

It was submitted in 2011, but the transportation agency’s chief back then rejected the proposal.

Separately, MRTH-II and Sumitomo Corp., the original contractor of the most congested railway system in the Philippines, are proposing to invest P6.75 billion into the system. The proposal involves the procurement of a total of 96 new train cars, the rehabilitation of the existing 73 coaches, and the extension of the MRT all the way to Caloocan, while liberating the government from renting the train system.

Under the proposal, a single point of responsibility will be implemented, meaning the rehabilitation and the maintenance of the line will be handled by a single company.

The proposals, Lotilla said, should also entail a provision that protects the public from ridiculously high fares.

“We want to be secured that the fares would not be too high,” the transport official said.

MRTH-II Chairman Robert John L. Sobrepeña, in response, allayed fears that the company would increase the fares sharply should its proposal be adopted by the government.

“We will not increase the fares sharply. It will be done staggeringly, and will only be equal to bus fares,” the businessman said in a separate interview.

The government, despite being open to the proposals, will still pursue the P54-billion takeover of the train line, Lotilla said.

He said the transportation department is looking at tapping the local lending market to bankroll the initiative that was thumbed down by the Legislative department.

Lawmakers were not keen on effecting the buyout, after they found the acquisition of the train line to be lacking in “economic value.” Congressmen argued that the P54 billion is only enough to buy the 80-percent economic interest held by the Land Bank of the Philippines and the Development Bank of the Philippines in MRT Corp., the owner of the train line.

To fully take over the line, the government must buy out all the shares and the bonds in the railway company. Another requirement of the buyout deal is for the government and the private partner to strike up a compromise deal to end the ongoing arbitration case in Singapore that was lodged against the state in 2008 due to its failure, as the operator of the line, to pay billions of equity rental payments to the owner of the rail system.

Should the buyout be completed in 2016, the transportation agency may then bid out the operations and maintenance contract of the line, thereby tapping private-sector efficiency and customer-service orientation for operational needs, while retaining regulatory functions for passenger protection with the government.

For now, passengers of the 15-year-old mass-transit system, which ferries more than half a million passengers daily, should make do with what is available: long queues caused by the lack of light-rail vehicles, an inefficient ticketing system, humid train cars, faulty elevators and escalators, and rude tellers.

The train system is even a risk to the safety of the riding public. Rail experts from MTR Corp. Ltd., the operator of the railway system in Hong Kong, concluded that the MRT is already exhibiting signs of obsolescence.

Hence, improvements must be made in order to address the risks posed to the lives of half a billion commuters.

The state of the line was poor enough to discourage prospective maintenance contractors from joining the auction for the P2.38-billion MRT 3 upkeep deal. The maintenance contract was snubbed twice by railway maintenance providers, such as Busan Transport Corp., Mosan-Inekon Phils. Ltd. Co., SMRT International Pte. Ltd., Miescorrail Inc. and D.M. Consunji Inc.

In order to address the present woes of the MRT 3, the government is currently in the process of rolling out a P9.7-billion multiyear venture to overhaul the line. The complete makeover is expected to be done within the term of President Aquino.

The train system has been operating at overcapacity since 2004. Currently, the line serves nearly 550,000 passengers per day; it even reached, at one point last year, the 650,000-daily-passenger mark. It has a rated capacity of 350,000 daily passengers.