The government's intervention in the light rail transit (LRT) systems should not be to rescue 'certain' investors but ensure good public services, said the Consumers Association of Penang (CAP).

Its president SM Mohamed Idris said consumers welcomed Finance Minister Daim Zainuddin's decision to defer the proposed bond issue to finance the two LRT operators, Sistem Transit Aliran Ringan (STAR) and Projek Usahasama Transit Ringan Automatik (Putra).

He added that the proposed bond issue or any other form of government assistance must not end up as a bailout as feared by some people.

"We are concerned, however, that any government intervention should be primarily aimed at enhancing good public services and not to rescue certain investors, as some have suggested," he said in a press statement today.

"We thus welcome the deferral as a chance to ensure that the proposed bond issue is indeed the best way of optimising the LRT system for the people's benefit."

Recently, Daim stated that he is waiting for comments from the Corporate Debt Restructuring Committee (CDRC) before proceeding with the issue.

The Business Times, quoting bank sources, had reported the Finance Ministry as telling the CDRC that it may miss its June 30 deadline to pay back RM6 billion because of a delay in issuing bonds to raise the money.

Last December the government announced it would take over the debts of the two private LRT firms as part of a major restructuring of Kuala Lumpur's public transport system.

The acquisition was to be financed through a series of bond issues and the railway networks would be leased back to the private firms to operate.

Properly valued

SM Mohamed also urged the government to ensure that the restructuring does not involve a fare increase.

"Public transport must be affordable or it is not public at all," he said.

"The interest of the companies themselves must be considered of only secondary importance now - the government's primary responsibility is to ensure the continuation of services for the public," he added, reminding the government that its primary responsibility lies in protecting people's right to "a decent and affordable public transport service".

SM Mohamed said if the government is to proceed with the bond issue, it must therefore ensure that the companies are properly valued and fully audited.

He said the government must not repeat the mistake it made by paying well over the market value when it took over control of the Malaysian Airline System.

'Good money after bad'

SM Mohamed added that one of the operators, STAR LRT, has already received millions of ringgit in public money through loans and investment from the Employees Provident Fund (EPF).

"The government must ensure that it is not simply throwing good money after bad," he said.

He questioned whether there had been any necessity to privatise the LRT system in the first place, given the high cost and length of time needed to recover the costs.

"Now that the operators are running in trouble, however, the government is faced with the straightforward choice of whether to protect the consumers or to protect the investors," he said.

The LRT lines, running 56km, were the first public transport system in the traffic-clogged city of 1.5 million. But usage has failed to meet expectations.

Putra is owned by debt-ridden conglomerate Renong. Business Times reported that lenders for the LRT projects include Commerce International Merchant Bankers, PhileoAllied and RHB Bank.

STAR's shareholders are UK's Taylor Woodrow plc, Employees Provident Fund, Pension Trust Fund and Lembaga Urusan Tabung Haji.