SEC. 3. Section three of the same Act is hereby further amended by inserting thereafter sections three-a, three-b, three-c and three-d which shall read as follows:
"SEC. 3-a. The unpaid subscription of the Government in the amount of P489,732,158.00 shall be paid as follows:
the following obligations of the Philippine national railways to the Philippine government as of December 31, 1970, are hereby converted into common shares of stock to be held by the national government:
"(a) R & D Bonds 4% loan purchase in 1951 of ten (10) steam locomotives: Due May 15, 1996
P1,984,400.00
Outstanding Interest
1,038,082.24
P3,022,482.24
"(b) Loan acquired under R.A. No. 1000
P300,000.00
Outstanding interest
60,717.81
360,717.81
"(c) Promissory note of June 30, 1965, with 5% interest
P3,300,000.00
Outstanding interest
981,123.30
P4,281,123.30
"(d) Franchise Tax liability
P3,404,712.05
P11,069,035.40
"2. The obligation of the Philippine National Railways to the Reparations Commission amounting to P15,712,029.74 as of December 31, 1970 is hereby converted into common shares of stock to be held by the Special Economic Development Fund of the National Government
P15,712,029.74
"3. The obligation of the Philippine National Railways to the Central Bank of the Philippines amounting to P19,127,438.43 as of December 31, 1970 is hereby converted into common shares of stock to be held by the National Government which shall assume payment of said obligation out of the profits of the Central Bank accruing to the General Fund, so much of which as may be necessary is hereby appropriated for the purpose
P19,127,438.43
"4. The following outstanding obligations of the Philippine National Railways under Indent Bid No. 17 are hereby converted into common shares of stock to be held by the National Government which shall assume payment of said obligation, and for this purpose so much as may be necessary is hereby appropriated from the 50% portion of the proceeds of the stabilization tax under Republic Act Numbered Sixty-one hundred and twenty-five, the provisions of paragraph (a) of Section four of said Act to the contrary notwithstanding:
In US Dollars
In Philippine Pesos Estimated at P6.50 To $1
FY 1972
$1,789,000
P11,628,500
1973
1,726,000
11,219,000
1974
1,663,000
10,809,500
1975
1,600,000
10,400,000
1976
1,537,000
9,990,500
1977
1,475,000
9,587,500
1978
1,109,000
7,208,500
10,809,000
70,843,500
70,843,500.00
"5. The obligation of the Philippine National Railways to the Philippine National Bank amounting to P19,999,256.39 as of December 31, 1970 is hereby converted into common shares of stock to be held by the Philippine National Bank
P19,999,256.39
"6. The obligation of the Philippine National Railways to the Development Bank of the Philippines amounting to P18,925,405.74 as of December 31, 1970 is hereby converted into common shares of stock to be held by the Development Bank of the Philippines
18,925,405.74
"7. The following obligations of the Philippine National Railways to the Government Service Insurance System as of December 31, 1970:
"(a) Life and retirement insurance premiums—employer's and employees' shares
P25,247,641.81
"(b) Salary loan installments deducted from employee- borrowers
P1,421,138.14
"(c) Premiums for property insurance fund
731,220.20
P27,400,000.15
are hereby converted into preferred shares of stock with guaranteed dividends of 6% per annum, cumulative and redeemable during a period of five years, and fully guaranteed by the National Government.
27,400,000.15
"8. To finance the foreign exchange costs of the rehabilitation and selective modernization program of the Philippine National Railways, the sum of P124,491,250 is hereby appropriated from the Special Economic Development Fund under Republic Act Numbered Seventeen hundred and eighty-nine, as amended, and applied to the payment of the government subscription to common stock, as follows:
FY 1972
P46,800,000.00
1973
11,797,500.00
1974
26,763,750.00
1975
39,130,000.00
P124,491,250.00
Provided, That this appropriation or any part thereof may be substituted by equivalent allocation of capital goods from the dollar component of reparations, as follows:
FY 1972
$7,200,000.00
1973
1,815,000.00
1974
4,117,500.00
1975
6,020,000.00
$19,152,500.00
P124,491,250.00
"9. To finance the peso costs of the rehabilitation and selective modernization program of the Philippine National Railways, including working capital, the sum of P126,570,000 is hereby appropriated from the portions of the proceeds of the stabilization tax under paragraph (b) of Section four of Republic Act Numbered Sixty-one hundred and twenty-five, and applied to the payment of the government subscription to common stock, as follows:
FY
Peso Cost
Working Capital
Total
1972
P13,107,500
P10,000,000
P23,107,500
1973
24,590,000
P10,000,000
34,590,000
1974
24,502,500
P10,000,000
34,502,500
1975
24,170,000
P10,200,000
34,370,000
86,370,000
P40,200,000
126,700,000
Provided, That any deficiency in the portions of the proceeds of the stabilization tax under paragraph (b) of Section four of Republic Act Numbered Sixty-one hundred and twenty-five is hereby appropriated from
such funds in the National Treasury not otherwise appropriated, or from proceeds of bond issues, subject to the limitations and conditions as provided by existing law
126,570,000.00
"10. The remaining government subscription to common stock shall be paid as may hereafter be authorized by law
55,594,242.15
Total
P489,732,158.00
"SEC. 3-b. the funds for the rehabilitation and selective modernization program shall be used exclusively for the following purposes and never to pay for obligations already existing at the time of the approval of this amendatory act:
"1. The purchase of additional motive power, motor cavs, passenger cars, freight cars, baggage cars, cabooses, wrecking cranes and the necessary spare parts; and/or the rehabilitation of rolling stock;
"2. The improvement of work shops and line sheds such as passenger and freight car repair shops, storage yards, and shed-3;
"3. The improvement of tracks and structures such as rail replacement, ties, tie plate installation and replacement, ballast replacement, and slide and washout protection, improvement of bridges and culverts, and station buildings and their premises;
"4. The acquisition of tools and equipment necessary for maintenance and electrical purposes;
"5. The improvement or replacement of signal, communication and electrical equipment;
"6. The procurement of goods handling equipment; and
"7. Working capital.
"Within forty-five days after the opening of the annual regular session of the Congress of the Philippines, the Philippine National Railways shall submit to both Houses of Congress a report of its activities of the past year and a program for its activities for the next succeeding year, with particular emphasis on, but not limited to, the use of its capital for the purposes required in the herein section, and the establishment and use of the cash depreciation reserve under Section three-d, as well as the management audit required under Section eleven, together with such other data which the proper committees of Congress may require.
"SEC. 3-c. The corporation shall operate and maintain the Luzon Bus Line and Benguet Auto Line and as soon as practicable extend the services of these firms to provinces adjacent to those that are traversed by these railroad lines. Provided that as soon as possible, the corporation shall sell such surplus assets and properties, including realty, of the Luzon Bus Line and the Benguet Auto Line as shall not be necessary to or convenient for the operation of the corporation. The determination of what assets are to be sold may be made only in a regular meeting of the Board of Directors at which all members shall be present, with proper notice, supported with proper recommendations of the technical staff, that sale of such assets shall be taken up during the meeting; and must be approved by the affirmative votes of at least eight members. A description of the assets to be sold, the appraised value thereof, and the names of the directors voting for or against such sale, or abstaining from voting, shall be published in at least two (2) newspapers of national circulation within two (2) weeks after the decision of the board has been reached. All sales of real property, and of equipment with an appraised value of fifty thousand pesos or more, shall be by public auction; and the Auditor General is hereby authorized to promulgate rules and regulations to govern such sale in order to prevent collusive and fraudulent practices and to insure that the best price will be obtained for assets or property sold. A report of all invitations to bid and the result thereof shall be submitted to Congress not later than thirty (30) days after the bids shall have been opened; and such report shall be public record.
"SEC. 3-d. The Philippine National Railways is hereby required to earmark no less than seven percent of its annual gross income as cash reserve for depreciation of its equipment, which reserves shall be in the nature of a trust fund to be deposited in a bank or banks owned, controlled or supervised by the Government and can be used only for the purpose of replacement, additions and betterments, or major repair of said equipment, without prejudice to the use of any other kind of fund for any of the same purposes. The corporation is likewise required to earmark no less than one-half of one per cent of its annual gross income as cash reserve to be used for minor repair of its equipment, to be deposited as trust fund in any bank or banks owned or controlled by the Government, without prejudice to the use of any other kind of funds for the same purpose. Equipment is hereby denned as the rolling stock devoted to rail transportation service and related services such as steam, electric or diesel locomotives and other forms of motive power, passenger-train car, freight-train cars, work equipment, floating-equipment, and the necessary appurtenances, furniture, and fixtures thereof. Additions are hereby defined as additional equipment. Betterments are improvements of parts (minor items) of existing equipment through the substitution of superior parts for inferior parts replaced."
