Legco wants tunnel contract reviewed

PUBLISHED : Thursday, 06 October, 2005, 12:00am
UPDATED : Thursday, 06 October, 2005, 12:00am

Lawmakers have urged the government to renegotiate its contract with the Route Three Company, which operates the Tai Lam Tunnel on Route 3, to avoid future toll-rise applications.

Legislators failed in June to reverse a $3 toll increase to $25 for private cars and taxis. The tunnel operator is entitled by law to increase the toll if its net revenue falls below a fixed sum agreed upon by the government.

Democrat Andrew Cheng Kar-foo said at a Legco transport panel meeting that the minimum net revenue estimate was 'too optimistic' and allowed the operator 'to raise the toll persistently even when they make $200-$300 million profit every year'.

Wong Kwok-hing, the labour-sector lawmaker, agreed. 'Tate's Cairn Tunnel has to raise the toll at least six more times before meeting their target return. What can the government do to stop them?'

The permanent secretary for transport, Joshua Law Chi-kong, said the operator had to agree to any new terms.

'This is a contract we signed 30 years ago; neither party can make unilateral alteration,' Mr Law said. 'If you want to change it you need the consent of the tunnel company.'

The government is considering extending the company's franchise to operate the tunnel exclusively beyond 2025.

'We are now asking you to use franchise extension as a bargaining chip, to negotiate with them and see if they can adjust the excessively optimistic figure on their projected net revenue' Mr Cheng said.

The Route Three Company reported a net profit of $160 million for its 2003-2004 fiscal year. The agreed-upon minimum estimate, however, was $719 million.

Company executives argue the increase is necessary because the toll increase was delayed for five years. As of last year, the company also owed $81 million in interest payments on loans.

Meanwhile, the operator of the Tung Chung Cable Car Skyrail-ITM (HK) said it would not feature broadcast advertising in its cabins, except for personal audio tour commentary pointing out beauty spots to passengers.

'We saw the example set by the UK's largest Ferris wheel, the London Eye,' said the company's chief executive, Ken Chapman.