KUALA LUMPUR (March 20): The government "will not take the risk” to bring toll concessionaires to court if they demand compensation for loss of future earnings in a premature termination of a concession contract, Works Minister Datuk Fadillah Yusof said.

“The government will not take the risk of bringing them to court. (That's because) the losers will be the government and the rakyat if there is compensation to be paid on top of the legal costs,” Fadillah told the Dewan Rakyat today in reply to a question posed by Serdang Member of Parliament Ong Kian Ming.

He said in the event of the early termination of a concession, compensation for loss of future profits is “part of the negotiation” between the government and highway concessionaires despite it not being part of terms and conditions in most concession agreements.

"When there is an agreement between both (parties), it is fine. But when one side does not agree, they will insist on [compensation] of future profits,” he added.

Earlier, Fadillah quoted a 2010 study by the Performance Management & Delivery Unit which estimated overall costs to take over all highways in the country to be RM383.3 billion — comprising costs to take over the highway concessionaires (RM45.2 billion) and costs to abolish toll collection (RM338.1 billion).

Ong argued that compensation for future earnings should not be included in the calculation, and that the government could save more by going to court instead of abiding by the terms of the concessions.

“The cost for toll abolishments include compensation for loss of future profits for the toll companies. However, in the terms and conditions of almost all toll concessionaires which I have studied, there was no mention of takeover costs based on future profits.

“What they said is the payment for cost of construction and cost of capital,” said Ong.

“If they [concessionaires] don’t agree, go to court. [The government] can save on the compensation payment and and benefit the rakyat,” urged Ong.

Ong also brought up the proposed takeover of Eastern Dispersal Link (EDL) from Malaysian Resources Corp Bhd (MRCB) by the federal government, which did not include any calculation of future earnings from toll collection.

“What was underlined included the cost of construction, and part of the capital funded by shareholders for the payment — with a return of investment (ROI) of between 8% and 10%.

"So the formula can be used to take over other toll concessionaires such as LDP and the [Kajang]-SILK [highway],” said Ong.

On EDL, Fadillah said: “We have not finalised the compensation costs [for EDL], but negotiations have started.”