Group backs DOTC on LRT, MRT fare hike

MANILA, Philippines - The Department of Transportation and Communications (DOTC) has found an ally in the controversial fare increase for the Metro Rail Transit line 3 (MRT-3) as well as Light Rail Transit lines 1 and 2 last Jan. 4.

The non-government organization Foundation for Economic Freedom (FEF) issued yesterday a position paper stating that the government should allow market forces to dictate the cost of riding the MRT-3, LRT-1 and LRT-2.

The FEF said the government should cut and minimize its subsidy to the mass transit systems concentrated in the metropolis.

According to the group the existing fares, as well as the level of government subsidy, would not solve the persistent problems plaguing the MRT-3 and LRT systems.

“It has been politically expedient across successive administrations to subsidize the fares of Metro Manila train commuters. But the demonstrable mismanagement of this relatively small train system only corroborates the unsoundness of a policy that keeps fares below their economic value and marginal cost,” FEF added. 

It argued that train fares have stayed the same since 2003, even with the general price level nearly doubling since the beginning of 2000, while fares for other public transport modes such as buses and jeepneys have been adjusted periodically. 

“Train travel offers shorter and more predictable travel times, and thus should cost more. A sound fare policy will take into account the relative economic values (and competitive advantages) of every transport mode,” it said.

Set to maximum

The group explained that fares should be set to the maximum extent possible based on recovery of costs, including operations and maintenance and the “users pay” principle. 

“Government subsidy becomes justifiable only when full-cost recovery fares exceed the economic value of train travel, which by definition incorporates what the average commuter is willing and able to pay,” it said. 

The FEF cited the case in the US wherein the New York City Transit prides itself on having the best recovery ratios but manages to cover only 53 percent of its costs from rider fares.

 Rail lines benefit ‘non-poor’ riders

A study conducted in 2010 showed that riders from the economically-disadvantaged sector with a monthly income of P8,000 or less accounted for only one-third of Metro Manila train riders. 

“The subsidy ends up benefiting, not the poor, but mainly non-poor riders who understandably flock to the cheapest transport alternative. This overflow of non-poor riders aggravates the strain on train system operations and maintenance, compounding the damage already caused by negligent management,” it said. 

The 2015 budget allocates P7.4 billion for MRT-3 rehabilitation while a supplemental 2014 budget contains nearly P1.2 billion for the rehabilitation of the MRT and LRT lines.

The FEF said future fare settings should be insulated from political grandstanding and system management should be professionalized.

It also said the present train network should be expanded to more than 200 kilometers by 2030 from the current 79 kilometers.