Rail line P24 B in debt

MANILA, Philippines - The Philippine National Railways (PNR) is P24 billion in debt and cannot even sustain its annual operations without  national government support, according to a Commission on Audit (COA) report.

“Without subsidy from the national government, PNR would not be able to construct railroads, rehabilitate and improve its existing rail system and is not financially capable to sustain operations,” the audit team said.

The COA report said the PNR’s cash flow statement on money provided and used in operations, excluding subsidy, for the last five years showed that cash received from various sources of income was not enough to cover regular maintenance and operating expenses.

In 2013 alone, financial records show that the national government had to provide P254.6 million in subsidy to the PNR.

The PNR should formulate plans on improving its financial position considering that its corporate life is actually being extended for another 50 years, state auditors said in the recently released report.

The rail line should look into disposing of unserviceable and obsolete assets no longer used in operations and ascertaining other potential sources of funds or capital, the COA said.

Records show that PNR reported a huge negative operating cash flow at P301.243 million last year, indicating that it could not meet its debt service requirements to foreign creditors, which in the past were advanced by the national government.

Such advances totaling P22.703 billion does not even include its unrecorded liabilities and statutory obligations to other government agencies and contractors of at least P1.330 billion.

State auditors said that through the years, debt service requirements of matured principal and interests on foreign loans acquired and re-loaned to the PNR by the national government were advanced to the creditors by the Bureau of Treasury on due dates of payment. 

As of Dec. 31, 2013, total advances including guarantee fees and interests had accumulated to a substantial amount of P22,703,082,124 and no repayments had been made. 

“We believe that it is unlikely that the PNR could single-handedly discharge its huge liabilities; much more, perform its principal mandate to provide reasonable passenger fare and minimum cost of freight to the riding public,” the COA report said.

State auditors recommended that in order to address the problem, the agency should also undertake a complete physical inventory of all assets and improve the accounting system for proper recording of transactions to provide reliable information and financial reports that are vital in decision making by top management. 

In an exit conference with the audit team last May, the PNR management said the House of Representatives and the Senate had already approved the bill extending PNR’s Charter for another 50 years which is expected to have been signed by President Aquino two months ago.