Light Rail Manila Corp. (LRMC) warned that the construction of the remaining segments of the LRT Line 1 Cavite Extension Project could face delays if the government would reject their request for a fare increase.
The private operator of LRT Line 1 said that the with approved fares below the national level given the government’s repeated non-performance of their contractual obligations and with no payment of the fare deficits, banks may refuse them to draw on the loan for phases 2 and 3 of the LRT Cavite line.
LRMC obtained a P24 billion loan facility from several banks in February 2015 for the construction of the project.
“The repeated, long-term inaction on its contracted fare adjustments coupled with the expenses from the many capital project petitioner [LRMC] has implemented on the existing system that were supposed to be funded by firebox revenue also mean that the petitioner will most likely sustain significant net losses this year and the succeeding years,” LMRC said.
“This will negatively impact the breadth and the improvements the petitioner can implement. It will also increase the likelihood of the petitioner breaching the financial covenants in its loan facility, which to repeat can prompt its lenders to decline further loan releases for Phase 2 and 3 of the L1CEP,” it said.
Phases 2 and 3 or the Cavite portion of the LRT extension project would cover the Las Pinas, Zapote and Niog stations.
The first phase or from Baclaran Station in Pasay City to Dr. Santos Station in Parañaque City started operations in December 2024.
LMRC said if the fare increase is not granted, the approved fares will be 27 percent below the notional fare, resulting in deficit of as much as P153 million per quarter from about P96 million on average.
Based on pre-pandemic ridership levels, the fare deficit increased around P125 million per quarter. As of end-2023, the fare deficit reached around P3 billion, which the government has not paid.
“The timely implementation of contracted fare increases and the timely payment of fare deficit claims hen appropriate are among the most important obligations of the grantor’s [government] and corresponding rights of the petitioner [LMRC] under the concession agreement,” LRMC said.
“Any company or entity interested in participating in national government infrastructure and Build Better More Programs will undoubtedly look closely at how promptly and fully the grants comply with their payment obligations under their contracts,” it said.
LMRC said the government’s delays or failures to comply would severely erode the trust in the national government infrastructure programs.
“On the other hand, promptly and fully granting the petitioner’s contractual fare increases will send a strong signal to the local and international investors that the national government stands by its obligations and that it does not simply ‘promise the world’ to get entities to bid for national projects only to rename on those promises,” it said.
Based on the petition filed before the Rail Regulatory Unit of DOTr, LRMC is seeking P18.15 boarding fare plus P1.65 per kilometer distance fare. This represents a 10.25-percent increase from the actual fare of P13.29 plus P1.21.
This means that the proposed fare for an end-to-end journey will reach P58 for stored value cards, up from P43. This would reach P60 for single journey tickets, up from P45.
Under the concession agreement, LRMC’s notional fare would be adjusted on Aug. 1, 2016 and every second anniversary thereafter by an effective rate of 5 percent per annum, or 10.25 percent per adjustment. This means that the private operator LRMC is entitled to a 10-percent fare hike every two years.