Government mulls sale of MRT 3

MANILA, Philippines — The government plans to privatize not only the operations, but also the assets of the Metro Rail Transit Line 3 (MRT-3), as it can no longer afford to spend P9 billion yearly for the maintenance of the railway.

Data obtained by The STAR showed that the government spends at least P8.93 billion every year to operate and maintain the MRT-3 over the past 22 years, or from 2000 to 2021.

During the period, yearly revenue from fare collection only averaged P1.72 billion—which is just 19 percent of the annual expenses—putting the government in a tight spot operating the MRT-3 at a loss.

After fare revenue hit an all-time high of P2.78 billion in 2017, it declined for three straight years to P2.07 billion in 2018, P1.91 billion in 2019 and P604.27 million in 2020. For 2018 and 2019, the Department of Transportation (DOTr) had to cut the number of trips in the rail line to repair the train cars.

In 2020, the government placed Metro Manila under lockdown for an extended period of time to contain the spread of the virus. As such, mass transport units like the MRT-3 had to operate on limited capacity in compliance with public health protocols.

As expenses bloat and revenues drop, Transportation Undersecretary Cesar Chavez said the DOTr is moving to sell the MRT-3 to the private sector, setting the privatization in motion by assessing whether assets would be included in the package.

“We don’t have a defined scope for the privatization yet, [as] we need to first determine if we are privatizing just the O&M only or also including the assets,” Chavez told The STAR.

“All options are being studied, but the direction is to privatize MRT-3,” he said.

Sobrepeña-led Metro Rail Transit Corp. (MRTC) is set to transfer the railway to the government by 2025 under the build-lease-transfer agreement for the MRT-3. The deal has tasked the DOTr to handle the collection of fares and the MRTC to maintain the rail line and its train cars.

In exchange, MRTC is paid monthly fees through fares collected from passengers, but in some years ticket revenues fell short and the government footed the bill. Once the contract expires in 2025, the DOTr will be left to do everything on its own in sustaining MRT-3 operations.

Infrawatch PH convenor Terry Ridon has urged the DOTr to properly price the MRT-3 before putting it up for sale, especially as privatizing the rail line means letting go of fare revenues as well.

Ridon, who used to serve as a member of the House Committee on Transportation in his legislator years, warned that privatizing the MRT-3 could result in fare hikes to the disadvantage of the riding public.

“Government should be able to price the MRT-3 not only on the value of its existing assets—as these may already be severely depreciated assets—but on the value of future forgone revenues if operations will be transferred to the private sector,” Ridon told The STAR.

“The immediate risks of privatizing MRT-3 will be the prospect of higher fares for the commuting public and undervaluation of both the O&M business and the existing assets. Undervaluation is a concern, particularly because this would mean a smaller purchase price paid to government, even if the privatization process is subjected to competitive bidding,” he said.

In 2011, Pangilinan-led Metro Pacific Investments Corp. (MPIC) submitted a proposal to put in $524 million to modernize the MRT-3. However, the administration of former president Benigno Aquino III rejected MPIC’s offer that would entail increasing MRT-3 fares.

MPIC filed another proposal to take over the operations and maintenance of the MRT-3 in 2017, but the government refused the bid yet again in 2020.

Last week, MPIC chairman Manuel V. Pangilinan told reporters his group wants to focus its investments on food and health for the meantime, although his doors remain open for big-ticket projects that the government may bid to the private sector.

“We will take a look at it because we are in that space in a big way. We will look at it selectively since we are big investors in infrastructure. For me, the country needs food, logistics and health right now, that’s why these are the high priorities for us,” Pangilinan said.