Today marks a turning point in the history of the Light Rail Transit 1 or LRT 1.

The train system is up

for privatization. The consortium led by the Ayala group and Metro Pacific of Manny V. Pangilinan will
operate the train system for 32 years. They will also be building the extension of the train line to
Cavite.

But unlike the beleaguered MRT3 which so often makes the news due to technical glitches and major
ccidents, the LRT 1 is doing quite fine under government control. It is not deep in debt. Its revenues
even subsidize sister train line LRT2. Yet the Aquino government believes that the LRT 1 should be
placed in the hands of private corporations. This, after the government spent P1.8 billion for the
rehabilitation of the LRT 1 and LRT 2.

What happens when the train line is privatized. For starters, the LRT 1 will no longer be run like a
public service. It will be run just like any other business operated by Ayala and MVP. It will be no
different from Maynilad, Manila Water, Smart, Globe and Meralco.

Here are 8 things commuters and the public should know about this P65 billion privatization deal that
will be in place for 32 years.

The contract allows private operators a 10.25% fare increase every 2 years and a 5% increase upon
the completion of the extension project.

If the fares set by government are less than the fares demanded by the private operators,
government will have to pay for the difference. This is called the Deficit Payment.

Commuters or the government will pay for surges in electricity rates. Under the agreement, this is
called the Differential Generation Cost. This lays the basis for another fare hike or another
government payment.

Fares will also be adjusted based on the prevailing inflation rates.

Government pays for the real property taxes for the 32 year duration of the contract. This can reach
up to P64 billion for the term of the contract.

The concessionaire will only pay the government 10% of the Concession Fee of P9.3 billion up front
after the signing of the contract. The rest of the concession fee will be paid starting on the 5th year of
the contract. This means that the payments for the concession fee will be coming from the operations
of the existing train lines. Ginisa tayo sa sariling mantika.

Around 964 employees of the LRTA are in danger of losing their jobs as they will only be absorbed by
the private operator for 6 months.
Government puts up a P500 million blocked account to ensure that it would be able to pay all of the
profit guarantees it gave the private operators.

The consortium of Ayala and Metro Pacific is now a train monopoly that controls the operations and
maintenance of the LRT Line 1, the extension project, the automated fare collection system and even
the common station in Trinoma. They will be in a unique position to dictate fares and everything else
related to running the train system.

Government has not learned from the experience of MRT and many other privatization deals gone
sour. In the end, it will be the public and the commuters who will shoulder the burden of Aquino’s
folly. ###