LTFRB urged to crack down on franchise ‘kabit’ system

REFORM OVERDUE Jeepneys ply Padre Burgos Avenue in Manila, mostly under a problematic franchise system. —RICHARD A. REYES

The House committee on transportation has called on the Land Transportation and Franchising Regulatory Board (LTFRB) to issue stronger rules on an informal subcontracting system among public utility vehicle (PUV) franchise holders, warning that its continuation would circumvent and weaken the public utility vehicle modernization program (PUVMP).

The arrangement—dubbed by drivers and operators the “kabit” system—came up during the panel’s hearing on Thursday as part of the House’s moto proprio (on one’s own initiative) investigation of the issues and challenges surrounding the government’s modernization program.

The system was described an illegal arrangement wherein a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such a franchise.

This after the panel discovered that one corporation recognized under the PUVMP allowed a group of unconsolidated operators to participate in its PUV operations without becoming stockholders, to skirt the government’s requirement of consolidation.

President Marcos has extended the government’s deadline for consolidation—the first requirement under the PUVMP—up to April 31, after which transport authorities are expected to crackdown on unconsolidated jeepneys.

‘Colorum as legit’

Transportation panel vice chair and Quezon province Rep. Reynante Arrogancia, in a separate statement issued on Saturday, said the current or general rule is that unconsolidated operators should become stockholders first.

So it was essentially a “colorum masquerading as legit … it enjoys being pseudo-legit but does not assume any business risk and does not follow the rules,” Arrogancia said.

He called on the LTFRB and the Office of Transportation Cooperatives (OTC) to “clearly define, delineate and delimit the specific conditions under which the subcontracting arrangements can be used as an exception to the general rule.”

Currently, the LTFRB allows subcontracting—but given the framework of the PUVMP, Arrogancia said it was “reasonable to expect that there should be rules for when subcontracting applies and when it does not.”

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He called on the LTFRB to have safeguards in place to “make sure that unconsolidated operators do not complicate or disrupt the operations and finances of consolidated operators with whom the unconsolidated operators enter into ‘special arrangements’ that have the features of the unauthorized kabit system.”

“Subcontracting should have permission from the LTFRB and OTC before any PUV cooperative or corporation enters into a subcontracting agreement,” he added.