An egg-and-beef sandwich costs more than an egg sandwich - that's just business. But in a television advertisement launched by the MTR Corporation last month about the merging of its rail operation with that of the Kowloon-Canton Railway Corporation, the MTR Corp tried to soft-sell the move by implying fares would drop on the two lines. In the advert, a student challenges his teacher in a classroom by using an egg sandwich example, saying: 'Sir, after the rail merger, fares won't increase, but will actually decrease.' A janitor sweeping outside peeps into the classroom and ends the footage with a line that infuriated legislators: 'It [the fare reduction] will come as soon as it [the Rail Merger Bill] is passed.' This desperate tactic to win public support in the hope it would speed up the passage of the Rail Merger Bill failed to impress members of the bills committee, especially as they have to attend many meetings this month. The short-lived advert, which was first aired on April 11, was withdrawn on April 17 after legislators complained it was putting pressure on their scrutiny of the Rail Merger Bill. That the government is in a rush to get the bill passed is indicated by the schedule of Legislative Council meetings for the rest of this month. A total of 13 meetings have been scheduled, - including two on Saturdays - followed by six more in June, before the council breaks for the summer. The proposed merger has been in the making for more than three years. The two rail companies began formal discussions in 2004 and signed a non-binding memorandum of understanding on the structure and terms for the merger in April 2006. Raymond So Wai-man, professor of finance at the Chinese University of Hong Kong, said the government had used the fare savings, which would amount to HK$600 million a year, as 'bait'. When the merger package was announced, it was decided to freeze fares until April next year. It was a condition of the package that fares would only be reduced from the first day of the merger if all procedures were passed before mid-July. Fares would then be reviewed on an annual basis under a fare-adjustment mechanism, using the change in the composite consumer price index (CCPI), wages of transport workers and productivity in the formula. But Professor So said it would be unwise to include inflation [CCPI] in the formula. 'In the foreseeable future we're not going to see deflation anymore. Truck drivers' salaries [on which the formula is based] are already low,' Professor So said. Some legislators are also concerned that the merged company would be given a free hand in adjusting fares upwards immediately. 'It is like giving a knife to the MTR. If the company wants to increase the fares in the future,' Mandy Tam Heung-man of the Civic Party said, 'we, legislators, have no say as it no longer has to be discussed in Legco. It can do whatever it wants.' 'The MTR is sending out a very misleading message to Hong Kong people,' she added, citing the advert. 'It keeps saying the integration will bring a fare reduction to passengers. But the truth is that in April 2008 the new rail company might increase fares and consumers might have to pay more than they are paying now.' Andrew Cheng Kar-foo of the Democratic Party was also concerned. He pointed out the public might not benefit from the merger and the railway operator would be just another Link Reit. 'The Link Reit can increase rents whenever it wants to and the proposed merger also gives a free hand to the operator to adjust fares,' he said. 'And under the proposed fare mechanism, there is no guarantee that ticket prices will go down if the rail company enjoys a considerable profit.' According to MTR Corp, combined operations from the rail merger will save up to HK$450 million per year, which will be realised in a few years. The MTR Corp said lower operation cost brought by the synergy effects had been considered as one of the fare-adjustment factors. 'It is also hard to predict if inflation or deflation will come in the future. We believe it is appropriate to include these indices in the formula. The formula can also let investors know the business environment of the MTR better,' said a spokeswoman. The Environment, Transport and Works Bureau said the mechanism under which fares would go up or down according to changes in economic conditions would provide better protection to the public as the two railway corporations had fare autonomy. There are other issues apart from fare cuts. They range from minor concerns like the installation of toilets at MTR stations, to the thorny issue of the valuation of property development projects under the KCRC. It is unclear whether the bill will be passed before the summer session. If not there will be further months of delay. Under the bill, the MTR Corp will pay HK$4.91 billion for the rights to develop eight property sites. These include real estate at the West Kowloon Station, a prime site which is part of the planned Kowloon Southern Link. The MTR Corp will also pay an additional HK$2.84 billion for a portfolio of investment properties and management contracts under the deal. The KCRC will retain ownership of these assets while the merged company will develop these sites. The MTR Corp will also pay the government an upfront payment of HK$4.25 billion for leasing the KCRC's rail lines and fixed annual payments of HK$750 million until 2056. The contentious issue is how the KCRC's properties were valued in the deal. Professor So said details of calculation and cost structure of the property development rights should also be released to the public for a fair assessment. Ms Tam, who represents the accountancy sector, accused the MTR Corp and the government of offering too little information to justify their valuation process and methodology. 'Whenever we ask for more information, the railway company rejects our request citing it as confidential and commercial secrets,' she said. 'How can we scrutinise a bill when we are not given enough data and information to make a judgment? We are very worried that these properties which belong to Hong Kong people are being cheaply sold to the MTR.' Ms Tam pointed out that the property market had improved in recent years and she expressed doubt over valuations by the government. 'The MTR Corp will become one of the biggest developers in Hong Kong after the merger and will have long-lasting effects on the city,' she added. 'We must get things cleared before making any decision. But the government's intention is clear and it keeps arranging meetings. I really do not see why it wants to rush it though. There is no point in sacrificing quality of scrutiny just for a quick passage.' Mr Cheng said other issues such as discounted rates for disabled people, introducing performance requirements for the two rail utilities, bonuses for the chief executive officer and adopting a system of accountability were still unresolved. 'The government and the MTR Corp still owe us answers and it is unlikely that pan-democrats will support the bill. At least I for sure will not vote for it,' he said. But a spokeswoman for the railway company said that detailed information had been provided for the legislators. Valuation of properties was reached after considering market prices and recent transactions in neighbouring areas. But information about the sites involved sensitivities, as concerned developers were about to start selling flats there 'and it is inappropriate for us to reveal that information', she said. The government also pointed out that lawmakers were invited to attend a closed-door meeting on November 24 last year in which the sensitive information was revealed. Liberal Party deputy chairman Miriam Lau Kin-yee is quite optimistic that the bill can be passed before the summer break. 'We are still waiting for a government reply concerning arrangements for the railway staff and the 10 per cent adjustment in the fare mechanism,' she said. 'Legislators also demand that the railway company doesn't increase fares for two years after the merger and we are still waiting for the government to get back to us.' Responding to criticism of the fare adjustment mechanism, Ms Lau said the formula already had considered relevant factors to calculate fares. 'Also one cannot say for sure only inflation will come in the future. No one can foresee if inflation or deflation will definitely occur.' She also defended the MTR Corp, pointing out that the rail company had arranged a closed-doors meeting during which data and figures related to valuation of properties was revealed. 'Whether these figures and data are acceptable to lawmakers or the information given is enough, it is really up to the legislators to decide. But the railway company has already done its part,' Ms Lau said.