LRT-MRT fare hike: ‘User pays’ principle not applicable for public utilities – IBON

January 8, 2015

by superadmin

User pays’ is a neoliberal principle which means that government will no longer be responsible in making sure that the LRT/MRT is accessible and affordable to commuters

The “user pays” principle in transportation service pricing cited by the Department of Transportation and Communication (DOTC) for the LRT-MRT fare hike should be rejected. According to research group IBON, the principle goes against public good and the public service nature of mass transport.

‘User pays’ is a neoliberal principle which means that government will no longer be responsible in making sure that the LRT/MRT is accessible and affordable to commuters. They will have to pay for the full cost including operation, maintenance, debt-servicing, etc. According to IBON, the principle is an essential element of public-private partnership (PPP) projects the government is pushing to ensure that they are attractive for profit-seeking firms.

The DOTC explained that the “uniform distance-based fare scheme” for the three light rail transport lines apllies the ‘user pays’ principle directed by the government’s Medium-Term Philippine Development Plan (MTPDP) 2011-2016. The principle, which the World Bank has been promoting since the early 1980s, is based on the idea that the cost of a service must be substantially recovered from its beneficiaries or those who directly use it.

The DOTC also argues that the lack of fare adjustments has “crippled” the ability of the three rail lines to improve their facilities. IBON has however disputed this, saying that in the case of MRT3, 81% of total expenses go to financial obligations under the build-lease-transfer (BLT) contract while only 19% goes to operation and maintenance. In the case of LRT 1 and 2, debt servicing comprises 47% of total expenses.

The revision in fares involved as much as 50% (LRT1), 66% (LRT2) and 87% (MRT3) increases in the maximum fares charged on each rail line. The fare increase in some shorter journeys actually even doubled.

According to IBON, the ‘user pays’ principle is being invoked while the DOTC has not yet provided the public a clear and detailed information on LRT and MRT expenses. It remains unclear how much of the fare hikes will go to improving facilities as opposed to paying onerous obligations to various private firms involved in rail-related deals.

Moreover, the ‘user pays’ principle wrongly identifies the commuters as the only ones who benefit from the LRT/MRT rail services and hence the only ones who will be charged additionally, specifically through the rate hikes. Yet the burden of financing the rail service can be more equitably distributed if all the business-related beneficiaries and the wider economic benefits are properly identified. Fare hikes can be mitigated or even entirely avoided if only the government was more willing to charge all beneficiaries and to have a more progressive general tax system.

The rail service is too important for commuters that it is unjust to apply the ‘user pays’ principle that guarantees fare revenues and profits for private corporations in the LRT/MRT, the group said. Historically, transport infrastructure has been a public function and has been most effectively, efficiently and equitably provided by government. Commuter interests including affordability, accessibility and safety are not served by profit-oriented approaches such as the ‘user pays’ principle and the commercialization of public services, IBON said. (end)

IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.