Water firms enjoy freebies from govt
Free use of state facilities funded by foreign loans
The government has contracted foreign loans to give its two private concessionaires, Maynilad Water Systems and Manila Water Co., free use of its facilities, a consumer group said Wednesday.
The loans were used to cover the P8.5-billion Putatan Water Treatment plant in Cavite for Maynilad, and the P608 million Pinugay Septage Treatment Project in Antipolo for Manila Water, said Rodolfo Javellana, president of the Water for All Refund Movement.
Worse, while the two concessionaires never assumed the loans, they charged consumers for the unimplemented projects beginning in 2008, Javellana said.
Official documents, copies of which were furnished the Manila Standard, showed Maynilad denied knowledge of the loan but Manila Water was aware that the P608-million project was “grossly overpriced” but passed on the charges to the consumers, anyway, Javellana said.
Former Bagong Henerasyon Rep. Bernadette Herrera-Dy, a close ally of President Benigno Aquino III, had the Maynilad Putatan project investigated in Congress after she learned that some P700 million in debt service had been automatically appropriated annually.
President Aquino had ordered the Metropolitan Waterworks and Sewerage System to hold off any new ventures and loan but did not stop the concessionaires from passing on these charges to their customers, even
as the national government continued to pay for the loans.
“We demand that President Aquino break his silence on this water scam three years after we brought this to his attention. We expect him to abrogate the scandalous and immoral contracts and free the taxpayers from Luzon, Visayas and Mindanao from paying for these loans that they subsidize, while [consumers] in Metro Manila are being billed in advance for the still unimplemented projects,” Javellana said.
Documents show that in the case of Putatan, the facility was intended for the irrigation of farmlands in Cavite and Laguna but the farmers complained they could not afford the P14 million in power and maintenance costs.
With the plant lying idle, the MWSS asked the National Irrigation Administration to use it instead for water consumption.
NIA balked, however, when it learned that MWSS had assigned Maynilad the rights to use the irrigation agency’s assets in 2007, and demanded a share of what the private concessionaire was paying the MWSS.
The MWSS denied receiving any payment.
In a congressional probe in 2010, Maynilad said it did not use the Putatan facility because it built its own “state-of-the-art” plant to draw water from Laguna Bay to supply its customers.
In a position paper submitted to Congress, Maynilad president Victorio Vargas said his company did not acquire any of the NIA assets and so could not assume the loans for something they did not own.
The NIA assets will be returned when the concession agreement expires in 2037, Vargas said.
In the case of Pinugay project, Manila Water was aware that its contractor had overpriced the P608-million project because the facility would only use up 1.7 hectares, instead of the original 3.5 hectares, documents show.
In March 2010, shortly before the presidential elections, then President Gloria Macapagal Arroyo had inquired about the Pinugay project after the Commission on Audit submitted a report that said the contract was overpriced because the cost was not reduced even though the area was reduced by half.
The contractor, Salcon, sued for non-payment and the case was quietly settled, but the Arroyo administration recommended that a case against those involved in the anomalous contract be pursued.
“There was no action taken yet by the Aquino administration. No cases had been filed to this day but the crime is continuing because we are being billed for a project that never benefitted us,” Javellana said.
Vargas said when the operations of MWSS were privatized in 1997, among the technical and business assumptions that were provided to the bidders was the availability of a water treatment plant with a capacity of 300 million liters a day, on a take-or-pay basis. Under this arrangement, the build-operate-transfer project would be available at no cost to the West Zone concessionaire, he added.
He said the construction of the Putatan plant was among the “capital expenditure” projects that was passed on to consumers through their water rates.
“Neither MWSS nor Maynilad were involved in NIA’s obtaining the ADB (Asian Development Bank) loan. The NIA neither transferred its assets to MWSS or Maynilad, nor made MWSS or Maynilad assume the obligation to pay the ADB loan,” Vargas said.
“In fact, Maynilad came to know of the existence of the ADB loan when it came out in the papers sometime in December 2010,” the Maynilad president said.
“Maynilad is therefore not the owner of the NIA assets and is under no obligation, in fact and law, to assume the payment of the ADB loan in behalf of NIA,” Vargas said.
Herrera-Dy, however, asserted in her resolution that Maynilad was using the facilities for free at the expense of the entire nation that was paying for the loans.
Vargas said that except for the use of the land on which Maynilad built a water reservoir, the intake channel and forebay, Maynilad did not use the other NIA assets and spent more than P1.8 billion of its own funds to cover the acquisition of almost a hectare of land from Ayala Land Inc. to house the Putatan plant, the construction of the plant, a new pumping station, and the reservoir.
“In short, while the Maynilad uses the NIA property for free, the entire country continues to pay for the loans but Maynilad charges us all their expenditures as they rake in profits, with their income tax still being charged to consumers, for extracting free water from Laguna Bay and making us pay P48 per cubic meter. The same thing can be said of the Manila Water’s Pinugay plant at P38 per cubic meter,” Javellana said.
“In fact, the concessionaires already started billing us in advance as early as 2007 when the plants were only completed years later and in the case of Manila Water, was never implemented,” Javellana said.
In the congressional hearing, Vargas warned that to require Maynilad to assume in whole, or in part, the payment of the balance of the ADB loan would have “an adverse impact on the tariff that will be charged to the customers.”
In March 2010, the presidential assistant on water, Lorenzo Jamora, submitted a report to President Arroyo describing how Manila Water’s Pinugay project was grossly overpriced, when the ADB loan was being paid for by the government.
Jamora cited as an example the laboratory building, which at P7.66 million, cost P218,853 per square meter.
“The administration building with a floor area of 311 square meters was priced at P26.12 million that translates to P84,015 per sqm.,” the report added.
Jamora proposed that the Palace compel the MWSS to review the major cost items and insist on the reduction of the project cost proportionate to the significant reduction in size for development from 3.5 hectares to only 1.7 hectares, which would save the government of some P400 million.
He also proposed that charges should be filed against MWSS officials who had a direct hand in the bidding and implementation of the project.
The project was not implemented but the loan payment and collection from consumers have continued since 2008, when the Manila Water business plan was approved.
Four months after Jamora’s report, President Aquino ordered a stop to all MWSS loans and projects.
The Palace has remained silent on the controversial pass-on charges by the two private concessionaires, saying it would rather wait until the MWSS decides on the higher rates the two companies are seeking.
But opposition lawmakers on Wednesday said that the Palace should intervene, saying the executive department should have stepped in a long ago.
“Malacanang should step in and correct these anti-people acts of the service providers. But the Palace (will not do that) because these questionable acts of the water concessionaires are a result of the
privatization utilities,” Gabriela Rep. Luz Ilagan told the Manila Standard Today.
“When concessionaires are allowed to do anything they want to do because of their contracts, they can get away with murder. Government should intervene and carry out its mandate to provide basic services to the people,” Ilagan added.
Bayan Muna Rep. Carlos Zarate said offcials from the MWSS and the two concessionairs shuld shed light on the pass-on charges being put on the shoulders of consumers.
Zarate and fellow Bayan Muna Rep. Neri Colmenares earlier sought a congressional probe into the pass-on charges.
Zarate said the congressional probe should look into the decision of the MWSS to give the two concessionaires a 15-year extension on their contracts without any bidding. With Maricel V. Cruz
COMMENT DISCLAIMER: Reader comments posted on this Web site are not in any way endorsed by Manila Standard. Comments are views by manilastandard.net readers who exercise their right to free expression and they do not necessarily represent or reflect the position or viewpoint of manilastandard.net. While reserving this publicationâ€™s right to delete comments that are deemed offensive, indecent or inconsistent with Manila Standard editorial standards, Manila Standard may not be held liable for any false information posted by readers in this comments section.