The government would end up paying compensation of RM5.9 billion over the next 28 years to the concessionaire should the toll rates at the Second Link bridging between Johor and Singapore be reduced by 30 percent, according to Serdang parliamentarian Teo Nie Ching.

Prime Minister Najib Abdul Razak had announced on Tuesday that there will be a 30 percent toll reduction at the bridge linking Tanjung Kupang in Johor and Jalan Ahmad Ibrahim in Tuas, Singapore, after bilateral talks with his Singapore counterpart.

Although the reduced toll rates will ease the burden of traveling Malaysians and encourage increased trade and tourism between the two countries she said that the main concern is that the government will have to bear the cost.

suhakam suara keadilan 250309 teo nie ching "The toll reduction will not be borne by Linkedua Bhd, an entity owned by Plus Expressways Bhd. Instead the government have to bear the cost of the reduction by compensating the concessionaire," she said.

Teo ( left ) claimed that the government would be required to compensate as much as RM30 million annually.

"Under the terms of the concession agreement, the Second Link concession expires only in 2038, the compensation would easily amount to RM840 million without taking into account any increase in traffic volumes or toll rates," she explained.

Lopsided contract

Teo pointed out that the growth rates of traffic had increased by more than 10 percent over the past three years and is expected to grow in the near future.

"Using a conservative estimate of an average of just 10 percent traffic growth over the next 10 year and 5 percent thereafter, this will inflate the compensation payable over the next 28 years from RM840 million to RM2.67 billion," she said.

However, Teo said that based on the second Supplementary Concession Agreement with the government, Linkedua has the right to increase toll rates every five years commencing from 2003, and the formula for toll rate increase is crafted such that the higher the increase in traffic volume, the higher the increase in toll rates.

"For example, if every year on average the traffic increases by two percent over the preceding five years, the toll rate would increase by 10.4 percent.

“If every year the traffic increases by an average five percent, the toll rate would increase by 27.6 percent, and if the traffic increases by 8 percent, the toll rate would increase by 49.6 percent," she claimed.

She added that as a result of the unique clause that is extremely favourable to the concessionaire, assuming that the 30 percent discount to the schedules toll rates remain, then the government's compensation will increase to a massive RM5.9 billion over the next 28 years.

"The calculation above had not taken into consideration of the fact that with the toll reduction, its usage will increase. This means that profits for the toll concessionaire will actually increase!" she said.