The LRT3 project is currently in the midst of a massive cost-cutting programme, and over the weekend the project’s operator Prasarana has released a statement saying that it was fully aware that the initial RM10 billion budget allocated was insufficient.

The company stated that the government guaranteed bonds approved on March 30, 2015 only covered the cost of work package contracts and supply of feeder buses (RM9 billion), as well as land acquisition (RM1 billion). It added that it knew that a substantial increase in budget would be needed for LRT3 to be completed.

Said to be excluded from the bonds were the now-defunct goods and services tax (GST), the project development partner (PDP) fee and reimbursable costs, contingencies, owner’s costs (including contributions to utility companies and staff costs, among others), owner’s consultancy services like an independent checking engineer reporting to the Land Public Transport Commission (SPAD), preliminary and general costs, land rental, cost claims and interest incurred during construction.

Prasarana also claimed that it formally requested approval on March 30 this year to issue an additional RM22 billion in government guaranteed bonds, with the expectation that the total final cost of the project would increase to RM31.65 billion.

It now awaits instructions from the ministry of finance on the comprehensive cost rationalisation measures to be approved. Last Thursday, finance minister Lim Guan Eng announced that the cabinet had approved the reduced project cost of RM16.6 billion – a 47% or RM15 billion reduction.

This was achieved through measures such as reducing the number of stations and train sets (which themselves have been made smaller), as well as postponing the completion date from 2020 to 2024. Prasarana said that it would abide by the instructions of the ministry, and that the ministry’s decision to rationalise the cost of the project is also fully supported by SPAD.