THE Department of Finance (DoF) said on Tuesday that the lease contract between a unit of a state-led corporation and privately owned Chevron Philippines, Inc. contains “onerous” provisions as the oil firm is paying lower-than-market rental fees on a government property in Batangas.
In a statement, DoF said data from the National Development Co. (NDC) showed that Chevron had been paying a monthly rental fee of 74 centavos per square meter (sq.m.) on a 120-hectare or 1.2 million sq.m. property, or significantly lower compared with the monthly fair market rental value of P17.90 per sq.m.
“Under the terms of its lease contract with the NDC subsidiary Batangas Land Co., Inc. (BLCI), Chevron has been paying a miniscule rental fee to the government for the 1.2 million sq.m. industrial park in San Pascual, Batangas that it uses as an oil import terminal,” it said.
Finance Secretary Carlos G. Dominguez III, who is an NDC board member, described the deal as another “government contract with onerous provisions.”
It said the P10.66 million that Chevron pays yearly since 2010 accounts for just 4% of the suggested P257.76 million yearly payments if based on the current fair market rental rates.
Based on its assessment, the DoF said the property has a current market value of P4.9 billion to P5.3 billion. But Chevron has paid a total of P146.51 million for over 44 years from 1975 to 2019, which is around P3 million a year, in addition to real property taxes that the company pays under the agreement.
The payment translates to a rental yield of 0.2% of the property’s value, it said.
“Based on current standards that the state imposes on similar contracts, to have a rental yield of less than 1% is surely grossly disadvantageous to the government and the Filipino people,” Mr. Dominguez was quoted as saying.
Despite the increase in the yearly rental payments to P10.66 million starting in 2010, the amount is still “way below” market rates in the province, the DoF said.
“If the amount is adjusted to current fair market rates, the rental rate by now should be above P20 million a month or P257.76 million annually,” the statement added.
“We have to implement a totally transparent method of getting the best deal for the rental of all government property,” Mr. Dominguez told reporters in a Viber message Tuesday.
The DoF said that the supposed onerous items were found when the DoF-attached agency Privatization and Management Office (PMO) compared the lease terms of the BLCI-Chevron deal with the fair market value of the land in the Batangas area, based on NDC’s appraisal reports and the asset pool of the PMO.
A representative of Chevron, formerly Caltex (Philippines), Inc., said the company would issue a statement “once available.” — Beatrice M. Laforga