Oppose the MRT/LRT fare hike! (Part 1)

Posted: January 5, 2014 in Economy, Socio-Political

Last December 12, as the country reeled from the effects of Yolanda, a massive power rate hike, and increases in the prices of LPG, the Department of Transportation and Communication decided to hold a “one-time” public consultation on the “proposed” MRT-LRT fare hike. The so-called consultation would be a venue for government to present the new fare matrix and the basis for the new fares. Or so we thought.

Bayan and other cause-oriented groups such as RILES Network, PISTON and Anakbayan had asked the DOTC for copies of documents related to the fare increase as early as June 24, 2013. A letter was sent to the Secretary of the DOTC. We received a reply dated July 2, 2013 which included some links to websites but did not include any of the documents that would explain the basis of the fare increase or the process by which the fares are determined.

Six months later, DOTC calls for a consultation and still we have not been provided with any documents. What the DOTC presented last December 12 was a 64-slide Powerpoint presentation. It was definitely not a proper public hearing.

What have we learned so far? Not much has changed with the proposed increase since it was first presented in 2011. The increase is still very significant as the maximum fares would double in some cases.

PROPOSED LRT 1 FARE MATRIX FOR STORED VALUE AND SINGLE JOURNEY

Stations SV Fare SV Fare  SJ FARE SJ FARE
Baclaran Baclaran 29 Bclrn 30
EDSA 12 29 15 30
Libertad 13 28 15 30
Gil Puyat 13 27 15 30
Vito Cruz 14 26 15 30
Quirino 15 25 15 30
Pedro Gil 16 24 20 30
UN Ave. 17 23 20 30
Central 18 22 20 30
Carriedo 19 22 20 30
D. Jose 19 21 20 30
Blumentrit 20 20 20 20
Tayuman 21 20 30 20
Bambang 21 19 30 20
Abad Santos 22 18 30 20
R. Papa 23 17 30 20
5th Avenue 24 16 30 20
Monumento 25 15 30 15
Balintawak 27 13 30 15
Roosevelt 29 Rsvlt 30 Rsvlt

The current maximum fare for LRT 1 is P20 for stored value tickets. Under the proposed scheme, the new maximum fare would be P29 for stored value and P30 for single journey tickets, a 50% increase from the current maximum fare. The LRTA says the average increase per commuter per trip, based on the average distance traveled, would be P4.70 per trip or P9.40 for a round trip. Single journey tickets will come in P15, P20 and P30 and will be significantly more expensive than the fares for stored value tickets.

PROPOSED LRT 2 FARE MATRIX

Stations SVFare SVFare SJFare SJFare
Recto Recto 24 Recto 25
Legarda 12 23 15 25
Pureza 14 22 15 25
V. Mapa 15 21 15 25
J. Ruiz 16 19 20 20
Gilmore 17 18 20 20
Betty-Go B 18 17 20 20
Cubao 19 15 20 15
Anonas 21 14 25 15
Katipunan 22 13 25 15
Santolan 24 Sntln 25 Sntln

For the LRT 2, the new maximum fare would be P24 for stored value tickets and P25 for single journey tickets, an increase of 66% from the current maximum fare of P15. Single journey tickets will come in P15, P20 and P25 values. The LRTA estimates that the average impact on commuters, given the average distance traveled, will be P5.60 per trip. That’s P11.20 increase if you go round trip. Those who have taken the LRT 2 know that most of its passengers are actually students studying in the university belt in Manila.

PROPOSED MRT 3 FARE MATRIX OF SV AND SJ TICKETS

Stations Fare Fare
North Avenue North Avenue 28
Quezon Avenue 13 28
Kamuning 13 24
Cubao 16 24
Santolan 16 24
Oritgas 20 20
Shaw 20 20
Boni 20 20
Guadalupe 24 16
Buendia 24 16
Ayala 24 13
Magallanes 28 13
Taft 28 Taft

The maximum fare of the MRT 3 will go up from P15 to P28 for single journey and stored value tickets. That’s an 87% increase from the current maximum fare. The minimum fare also goes up from P10 to P13. According to the DOTC, the average increase per passenger per trip of the new fare matrix, based on the average distance traveled, would be a whopping P7.92 per trip or P15.84 for a round trip. That’s nearly P16 increase for a round trip.

As we said, the increase is significant. Coming on the heels of increases in electricity rates, oil prices and premiums for SSS and Philhealth, and without any significant wage increase, the new fares will burn a hole in the pockets of commuters.

Let us now examine the basis for the increase. Is there a legitimate ground for such fares? How did the new fares come to be? What is the basis of the computations? How were the rates approved?

The DOTC justified the increase by saying that the government should be reducing its subsidy for the train lines and that commuters should be the ones paying for the real cost of transportation (users pay principle). It also said that the train fares need to be adjusted so that they would be closer to the fares of other land transport such as buses and AUV/FX. However, the DOTC failed to present any basis for their computations, other than the so called need to reduce government subsidy and the need to continue paying debts incurred in the construction of the train lines.

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Let’s first address the argument that the train fares need to approximate the fares of other land transport. This is obviously without basis, the comparison is between apples and oranges. Land transport such as buses and AUV/FX are being operated for private profits. The train lines receive subsidy and are considered part of government’s service. These train lines are the fastest and cheapest means of transportation to bring workers and employees to their workplaces and to bring students to their schools. It is government’s obligation to provide this kind of service for working people and students because in the end, the whole economy benefits.

As for the question of subsidy, government says that the actual fare for the MRT is P53.96 but that commuters only pay an average fare of P12.40 while government subsidizes P41.56. How and why the “actual fare” reached P53.96, they do not explain.

What they do say is that government has been subsidizing the MRT at about P6-7 billion a year and that this subsidy should be reduced. What they do not sufficiently explain is why the need for a P6-7 billion yearly subsidy. What is government subsidizing here?

Under the MRT’s Build Lease Transfer Agreement, the train line has financial obligations in the form of Equity Rental Payments and Administrative Costs amounting to P5.504 billion and Taxes, Duties and Fees amounting to P2.088 billion. These debts are the result of an onerous contract during the Ramos administration that guaranteed the profits of the private developers. For example, the private developers were given a 15% guaranteed return on investment even if the trains were filled or not. Such were the demands of the private developers before “investing” in this so-called public-private partnership venture. In fact the loans of these private developers were also guaranteed by the Philippine government.

If the government thinks the subsidy is too much, then it should stop honoring the patently disadvantageous BLT Agreement which is the source of the financial woes of the MRT. It is this debt which is being passed on to the commuters via the proposed fare hike. It is this debt which government wants us to shoulder.

As for the LRT 1 and 2, this is a slightly different situation. The people at the LRTA combined the financial standing of LRT 1 and 2 (amounting to P4 billion) to make it appear that both trains were bleeding financially and therefore an increase is necessary for both.

However, in this presentation in 2011, the LRTA showed that even without a fare increase, the LRT 1 would do just fine. It would still have an excess of P23 million at the end of the year. It is the LRT 2 which has a deficit.

It is not clear how much LRT 1 and 2 have respectively in terms of obligations. During the consultation, the LRTA admitted that it is LRT 2 which has the bigger debt. Based on the LRTA’s estimates, LRT 1 will have the bigger revenue from the fare hike at P621 million compared to LRT 2’s P321 million revenues. This is because LRT 1 has a bigger ridership than LRT 2.  By combining financial obligations and revenues of the two different train lines, the effect is that commuters of LRT 1 are also paying for the debts of LRT 2.

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Meanwhile, the MRT 3 hopes to generate an additional P1.122 billion in revenues from the fare hike. All in all, the fare hike from LRT 1 and 2 and MRT 3 will give the government P2.06 billion in additional revenues.

The additional revenues will be used to compensate for the subsidy reduction for the trains. When we asked the MRT officials how much would the subsidy reduction be under the 2014 budget, they said P200 million. So where will the P1.2 billion in additional MRT revenues go? They did not say.

Also noticeable from the presentation was the very low non-rail revenues of the LRT 1 and 2 and MRT3. The non-rail revenues are generated from advertising and development of commercial space in train stations and other facilities. The LRT 1 and 2 had a combined non-rail revenue of P227 million, or just 6.1% of total revenues. For MRT3, non-rail revenues comprise a measly P27 million or 1.2% of total revenues. In other countries, non-rail revenues comprise up to 20% of total revenues. This is indeed strange since so many malls and commercial establishments are connected to the LRT and MRT. The trains themselves are moving billboards. What we know in the case of MRT3 is that the revenues from ads and development of commercial space go not to the government but to a private corporation owned by the original developers. This is another result of the onerous contract between the government and the private developers.

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