The cost of public transportation (Part 3)

Last Sunday, we’ve looked at 1) the cost-revenue-profit analysis as one of the 3 ways we look at in calculating public transportation fares.  Thursday, we moved on to 2) route profitability analysis in getting nearer to what it should be, but found out it is mainly intimately linked to the issuance of franchises and the number of vehicles (seats) available.  I am inclined to guess that’s how LTFRB is doing it, except that there seems to be a gross generalization all over the country because the rates are uniform, with the rates all approved in Manila.

In reality, the bases for the fares cannot be uniform.  Local conditions are different - the cost of fuel differs from place to place.  The load factors are different for each route, and the time of day fluctuations differ among highly urbanized areas, small cities, and other provincial areas.  Even jeepney types and capacities differ remarkably.  It is understandable that LTFRB prefer to standardize fare-setting, usually in parametric form of a fixed rate for the first 4 or 5 kilometers and additional rate per kilometer or meter beyond that.  This seemed acceptable to drivers, operators, and passengers alike, so we’ll just leave it at that.

The “higher” consideration that we said, and this will result to the 3rd way of looking at public transport costs/fares, which focus on urban planning, is what we have always stressed before as “transport and land use integration.”  Inevitably, existing systems are adaptive and reactive resulting in a “laissez faire” way of city growth.  For example, a developer suddenly acquires a huge swath of land in the uplands, far from any existing transport corridor.  He builds a huge housing subdivision, commercial center, or mixed-use complex, then demand from the government that a road be built leading to his private development.  The residents who migrated there, or other users, demand that a new jeepney route be established.

Government can look at it three ways.  First, it can think of the constituents, and build the road and put the jeepney routes in… at a huge price I might add.  Or, government can refuse and say it was the private sector who wanted that in the first place, so they should take care of their own problems.  Alternatively, government can just allow the market forces to prevail.  At any rate, the government is reacting and the fares have nothing to do whatsoever on how the city is growing.  But there is little discussion on the opportunity that transport fares may be used as tools to steer and govern urban growth.

Urban policy cannot be static, it has either to promote or to restrict.  Urban policy which neither promotes nor restrict is not a good policy at all.  And the government has the mandate to steer the direction of development, not react or adjust to it.  For example, in Japan, when a certain area is promoted for growth, government oftentimes sets lower fares towards that area.  There will be a subsidy of course.  But they can also impose higher fares to areas where they are restricting the growth.  The fare has nothing to do with the cost-revenue-profit or with route profitability.  Private sector cooperates because this is for the good of everybody.  For example, I’ve known of a company in Japan that asks their employees to live in a certain township.  And to entice them, they offer transportation allowances!

This is not practiced here.  But shouldn’t it be?  Try to think deeper on the problems besetting the transport sector… EDSA is a perfect example.  You have MRT-3 which is packed like sardines because they have fares lower than the EDSA buses at ground level.  Yet, you wonder why a sizable percentage of passengers still use the buses which are less comfortable/convenient, and generally have higher fares.  Then, thousands of them (buses) continue to operate when less than half the number could have accommodated the demand.  The transport fare is one of the most potent tools in urban economic growth.  It is also the least used …