Why the MRT/LRT fare hike is illegal and unnecessary

Posted: February 10, 2011 in Economy
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With the recent announcement of the DOTC that the MRT/LRT fare hike on March 1 will still push through, we need to intensify our protest and prepare for a legal challenge to this anti-people measure.

We believe that the fare hike is illegal.

There are no published rules and guidelines for raising the fares of the MRT/LRT. There are no existing standards of what constitutes a reasonable fare. The LRTA is both the proponent and approving authority of the fare hike. The LRTA does not think that it is required to hold public hearing. It only holds public consultations. This is an anomalous situation. A public service, such as the train lines, should be the subject of regulation, as is the case with power, water, toll fees and jeepney fares.  Why should the train lines be any different, especially when this decision affects some 1.2 million daily passengers?

There is no need for a fare hike.

In the case of the LRT 1, the current fares are enough to cover the salaries and operations costs of the system. Even without a fare hike, the LRT 1 is still expected to have a surplus of P23 million for 2011. The same should be true for the LRT 2 whose current fare is enough to pay for the salaries and operations costs of the system. However, without a fare hike, the LRT 2 is expected to have a deficit of P250 million in 2011. This is because of the huge debts of the LRT 2 and the relatively smaller ridership.

The LRTA hopes to raise some P875 million from the LRT 1 fare hike. This huge amount will be used to pay for the debts of LRT 2. In effect, the passengers of LRT 1 will be paying for the debts of LRT 2. Government keeps saying that it is unfair for taxpayers in Mindanao to be subsidizing the fare of the LRT passengers. However, government sees nothing wrong with the fact that passengers of LRT 1 end up cross-subsidizing the debts of LRT 2.

Instead of a fare hike, government should find ways to lessen the debt burden, increase revenues from other non-fare sources and increase the ridership of LRT 2.

In the case of the MRT, the current fares are enough to pay for the operating costs and salaries of the train line. Its total revenues reached P1.9 billion last year while operating costs and salaries only amounted to P645 million. This should have resulted in a surplus of at least P1.2 billion. However, MRT has some P7.8 billion in debts due to the “built-lease-transfer” agreement entered into by government with private developers.

The disadvantageous provisions of this contract have resulted in a huge debt burden for the government and the taxpayers. What should be done is to renegotiate the terms of the disadvantageous contract, instead of conveniently passing the debt burden on the commuters.

The DOTC also admitted that it still has some P1.1 billion in collectibles from commercial space development of the MRT. Most of the ad revenues of the MRT go to the MRT DevCo, a spin-off corporation from the original private developer Fil-Estate. This explains why, despite so many mall and billboards, the advertising revenues of MRT only account for some P5.1 million while revenue from other operations account for only P6.8 million. All the main revenues from the commercial development go to the MRT DevCo. This private entity has yet to pay its obligations to government.

It would be better for government to go after these private entities before it even considers a fare hike.

On  February 15, we call on all oppositors to the fare hike to join the protest at the LRTA board meeting. We will await the decision of the board on the fare hike. We need to pressure the board to scrap this anti-commuter policy. ###

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