BR risks 'derailment' over P4bn in uninsured assets
Pauline Dikuelo | Friday June 28, 2019 13:28
BusinessWeek has learnt that the rail utility has been in this situation for some time and is forced to dig into its own pockets to cover liabilities that arise from train accidents and other incidents.
According to the Auditor General, BR used to have a General Fund account set aside for purposes of covering its assets.
The Fund has since been depleted. The report highlighted that out of the BR’s assets, only P20 million for motor vehicles assets is insured.
“For a business that deals in transportation of goods and services, the cost to repair its assets considering the increase in train accidents in the past few years, is likely to be high,” reads the Auditor General’s report.
BR management reportedly told the Auditor General that they once floated a tender for the insurance of the BR assets, but the quotations received were too high and expensive.
Management was reportedly considering other options of insuring its assets such as opening a general insurance reserve for self-insurance.
BusinessWeek has spent six weeks waiting for official comment from BR on the matter, but the efforts have proven fruitless.
Enquiries had sought to establish how far the rail utility was in procuring full insurance and what risks it was taking by not having full cover.
The risk posed by the failure to insure could derail BR’s recovery, analysts said. According to the audited financial statements for the year to March 31, 2018. BR posted a profit of P48.6 million, compared to a loss of P43 million recorded during the prior year.
The improvement in performance was mainly attributable to an increase of P123.4 million in interest earned on loans made to a subsidiary.
The rail utility is amongst the country’s perennial loss-making parastatals, which has also received support in the form of guarantees and loans from government.
Some of the troubles have come from the burden of supporting the passenger rail service, which was reintroduced in 2016 after an eight-year absence.