The government feels it should not continue to pay very high compensation to highway concession companies to keep toll rates from rising, said Minister in the Prime Minister's Department Abdul Wahid Omar.

He said the government had to pay RM510 million in compensation for the January to October period this year following the decision to postpone toll rate increase which should have been implemented in January.

Speaking on TV3's programme 'Soal Jawab' last night, he said the amount was higher compared to the RM403 million compensation paid to concession companies last year.

As such we allowed concession companies to raise toll rates," he said, adding that the hike was carried out according to the concession agreements signed earlier.

He said the increase only covered highways in the urban areas with a maximum rate increase of RM1.

According to Abdul Wahid, the measure was to enable the government to spend its financial resources for the people such as providing facilities like schools and clinics.

PSKLM questions Rafizi's proposal

Meanwhile the Association of Highway Concessionaires Malaysia (PSKLM) is questioning PKR secretary-general Rafizi Ramli's proposal to give priority to concessionaires of existing highways in future road projects in lieu of toll rate hikes.

In a statement Wednesday, the association pointed out that in Malaysia there are 31 toll road concessions owned by different companies with investors and stakeholders who have different responsibility of commitments in accordance with the policies of their respective companies.

This, he said, means that the government should have 31 'replacement projects' for each of the 31 existing concession holders.

"However, if the project given deals with infrastructure other than roads, for example construction of a hospital, this means the concessionaires would have to invest more money to get the necessary expertise and equipment.

"This can lead to increasing construction costs and eventually can cost the country," said PSKLM.

This scenario would mean existing companies that specialise in hospital construction will no longer be able to compete for the project, because it has been given directly to the highway concession company.

"This, of course, goes against the principles of openness and fair competition prevailing in the market," the association said, adding that the economic, political and social landscape of the country may change as and when appropriate in the future.

In a posting on his blog, Rafizi proposed that highway concessionaires are given priority in future highway projects in exchange for not increasing toll rates.

In this way, he said, they do not have to worry about low profits because they have the potential to continue to be involved in future government highway projects with terms of the agreement stipulated fairly with reasonable profit rates.

PSKLM stressed that the proposal required the consent of all the stakeholders of the 31 highways in the country, and in reality it can cause various complications and take a long time.

According to him, most likely 'replacement projects' do not meet the conditions set out by financial institutions which had financed the original concession.

PSKLM said concession holders would probably be unable to meet their financial loans if toll rates are not raised in exchange for replacement projects, as their loans are based on the projected cash flow from the periodic increase in toll rates agreed upon in the concession agreements.

"It is not wrong for us to indicate that there is a possibility the concession company cannot meet their financial obligations to the lender in the event toll rate adjustments are not implemented," the statement said.

Toll rate adjustments effective Thursday involves over 10 major highways in the Klang Valley and Johor.

On Tuesday, the Works Ministry said the government had postponed toll hikes on highways that qualify for the increase since 2008 as an initiative to reduce the financial burden of the people.

It said the total compensation paid by the government to highway concessionaires from 2008 to 2013 was RM1,108.91 billion, while in 2014 it was RM402.99mil.

- Bernama