Govt may withdraw subsidies for highways with alternative routes

Thursday June 10, 2010



By DERRICK VINESH

derrickvinesh@thestar.com.my

KULIM: The Government may withdraw subsidies given to highway concession holders that operate on road stretches with alternative toll-free roads, said Works Minister Datuk Shaziman Abu Mansor.


“It is justifiable to withdraw subsidies for these roads, as toll-free old roads are available for motorists to use. But the subsidies should be retained for highway stretches that have no clear alternative options for motorists to use,” he said after inspecting the relocation of a sewage treatment plant in a nursing college project here yesterday.


Shaziman was commenting on the statement by Minister in the Prime Minister’s Department Datuk Seri Idris Jala that Malaysia would be bankrupt by 2019 if it did not cut fuel and other subsidies and rein in borrowings.


Idris had said the Government, which spent RM4.6bil in annual toll subsidies, could save RM3.7bil over five years if it allowed toll rates to be increased in the middle of the year as per concession agreement for highways with alternative toll-free routes.


Shaziman, however, said the Cabinet had so far not made any decision to withdraw the subsidies to the concession holders.



“Highways, roads like the SMART tunnel, North-South Expressway and Ampang-Kuala Lumpur Elevated Highway (AKLEH), have other optional routes.



“If we do not allow an increase in toll fares on these highways according to their concession agreements, the Government may end up paying compensation that could run into a few billion ringgit,” he said.



Shaziman added that the money allocated to pay the compensation could be used for other purposes, such as the building of schools and hospitals as well as to improve public transportation.



He said the ministry was also willing to discuss with the Malaysian Highway Authority (LLM) and related parties to come up with an acceptable investment return rate (IRR) to be given to the concession holders.



“Some concession holders claim that their returns were as low as 12% as their maintenance costs were high.”



He noted that in some cases, when their IRR was below 10%, some operators might not be able to obtain bank loans, as it was a high risk.

http://thestar.com.my/news/story.asp?file=/2010/6/10/nation/6436071&sec=nation