Gov’t advances P220M for maturing PNR debts

The Arroyo administration will overhaul the Philippine National Railways Corp. (PNR), a move that would include increases in train fare as the National Government advanced over P220 million to pay for the company’s maturing obligations.

Administration officials said PNR’s problems were so serious that the government did not even have even an inkling of the company’s total assets since it has never conducted a physical inventory in its entire corporate existence.

The Department of Finance (DOF) announced over the weekend that PNR had about P220 maturing obligations this year, arising from accumulated debt over years of failed attempts to revitalize the company.

DOF Undersecretary Nieves Osorio said the obligations included partial payment for a P44-million and a P199-million loan from the Japan Bank for International Cooperation (JBIC).

Osorio said the National Government was also paying for the debt service of the $37.9-million loan from the Export Finance Insurance Corp. of the US as well as the second-tranche amounting to $6.985 million.

The JBIC loans, according to Osorio, were direct borrowings by the National Government and relent to PNR, with principals and interest scheduled to mature on June 20 this year.

On the other hand, the EFIC loans were PNR obligations guaranteed by the NG and the interest and principal repayments for these loans became due last May 15, 2005.

Osorio said the DOF has been paying for PNR’s obligations since the company has never been able to service them on its own. Total advances now amount to P13 billion.

This prompted Finance Secretary Cesar V. Purisima to call for an overhaul of the company, adding that PNR should restructure its operations and reformulate its rates to generate a steady cashflow.

"We can not have PNR forever dependent on NG," Purisima said. "They have to be able to service their own loans with their own income stream."

The latest available audit report from the Commission on Audit (COA) showed that PNR reported fixed assets and balance amounting to P10.93 billion as of December 2003 which the company said accounted for 91 percent of its total assets.

According to COA, however, PNR’s claims could not be validated due to "repeated failure of management, from year to year, to conduct the required physical inventory."

"No records show that the agency had ever conducted a physical inventory of its fixed assets in its entire corporate existence," COA said in its 2003 audit report on PNR.

According to COA, the inadequacy of the agency’s records did not permit the application of alternative audit procedures to determine the existence of the assets as well as the validity and accuracy of the balances of the accounts.

"[COA audit] disclosed serious weaknesses and major breakdowns in the accounting systems which grossly impaired the fair representation of various major accounts in the financial statements," COA said.