DOF, SMC in talks to enhance MRT-7 contract

Posted at 09/27/2012 7:32 AM | Updated as of 09/27/2012 7:32 AM

MANILA, Philippines - The Department of Finance (DOF) and San Miguel Holdings Corp., the proponent of Metro Rail Transit Line 7 (MRT-7) are discussing ways to enhance the existing concession agreement for the much delayed $1.2-billion rail project, a ranking finance official told The STAR.

The finance department is looking at ways to enhance the existing concession agreement to ensure that the government would not be at the losing end, Finance undersecretary John Philip Sevilla said in an interview.

He said discussions with San Miguel are centered on ensuring compliance with performance standards stipulated in the agreement.

“We’re discussing clarifications to the existing contract. These include performance standards for the MRT system, highway and bus terminal and ensuring that the government has a way to enforce compliance,” Sevilla said.

Furthermore, he said the government wants to ensure that it would be able to slap penalties for non-compliance and termination of extended non-compliance.

Sevilla said the government also wants to make sure that there are adequate mechanisms to monitor both passenger and real estate developments of the project to ensure that the government would get its fair share from those developments.

“We’re finalizing all cost adjustments,” he said.

The MRT 7 project has failed to take off because of the lack of a performance undertaking from the DOF.

Finance Secretary Cesar Purisima, for his part, said that the DOF could not issue a performance undertaking without knowing the precise amounts which government would have to pay after all the cost adjustments.

The proposed MRT-7 is expected to complement the existing mass transit lines. It would run from San Jose del Monte City, Bulacan to SM City North Edsa, linking up with existing the Light Rail Transit Line 1 and MRT 3.

In 2010, San Miguel Holdings acquired a 51 percent equity interest in Universal LRT Corp. which was awarded the concession to operate MRT-7 for 25 years in 2008.

The project was supposed to commence commercial operations this year but issues raised by local government units delayed the project as well as the lack of a performance undertaking from the DOF.

It involves the construction of a 22-kilometer train line with 14 stations from Bulacan to Edsa in Quezon City. The project is expected to serve roughly two million public transport users.