THE fare increases for the Light Rail Transit Lines 1 and 2 (LRT-1 and LRT-2) and the Metro Rail Transit Line 3 (MRT3) come down to one issue: government subsidies. Most of the other arguments both for and against the increase are just noise.
“Why should taxpayers outside of Metro Manila pay for a rail system that they do not use?” is one of our favorites. By the same logic, why should taxpayers in Metro Manila pay for national roads in provinces hundreds of kilometers from the metropolitan area? Both arguments are nonsense since a nation’s economy and infrastructure is completely connected one way or another.
The justification for the transit rail fare increases is that the actual cost of taking a passenger from one point on the system to another is not being covered by the amount of the fare. However, no one really knows the actual cost for that transportation.
Even the Department of Transportation and Communications (DOTC) uses ambiguous terms as the “government subsidizes around 60 percent of the cost for each LRT-1 and LRT-2 passenger and around 75 percent of each MRT-3 passenger.” The word “around” can cover a multitude of financial sins and absolutely would not be accepted in the private sector.
But the real issue and the real problem is the government subsidy.
Government subsidies of any price paid by the consumer distort the market. Indonesia’s fuel subsidy is a classic example. The fuel subsidy will cost Indonesia $20 billion this year, which is one-fifth of the country’s national budget and the artificially low price of gasoline has made Indonesia one of the least fuel–conservation conscious countries
in the world.
The Philippine government has been subsidizing the MRT at about P6-7 billion a year. Some say that this is because of a bad public and/or private sector operation agreement that should have been voided.
But, if true, what it really proves is that hybrid projects like these are inherently flawed. The private sector operates within market forces. The government operates within political forces. You cannot mix apples and mangoes successfully.
The subsidization program is a failure both financially and politically. The consumer has suffered in ways that would not have occurred if the rail system were totally private. The taxpayers have suffered supporting a system that has not served the train passengers well.
If the government builds, owns, operates, and subsidizes prices, at least we know what we are getting into both good and bad. The same is true for private sector ownership. But the current situation seems to gives the public only bad results and this system should be stopped.
Image credits: Jimbo Albano