Transport Econ 14: On the MRT and LRT Fare Hike

The fare hike in MRT and LRT trains in Metro Manila was implemented yesterday. This is a long-delayed move as any government subsidy program immediately creates an entitlement and dependency thinking in the public. People think that they are entitled to various and endless subsidies if not freebies from the government and are less concerned of the trade off or sacrifices somewhere else just to finance the subsidies and freebies that they enjoy.

And that largely suggest that the train fare subsidy is wrong, in theory and practice. 

1. If government should subsidize commuters in Metro Manila (night time population about 12-13 million, day time about 15 million), then it should also subsidize commuters in Bicol, Ilocos, Pangasinan, Cebu, Negros, Iloilo, Davao, Cagayan de Oro, Zamboanga,... People there are also citizens of the country and pay taxes. Double talk.

2. Government taxes and bureaucratizes buses that also transport so many passengers while it subsidizes its own train service. Double talk.

3. Government and activists say Metro Manila should be decongested then it gives many subsidies to residents and commuters of MM that effectively encourages people to flock to the metropolis. Double talk.

My undergrad organization at UPSE, the UP ETC made this poster to elicit discussions in their fb page.

The claim that if train fare subsidy is totally removed, MRT fares will rise to P60 or so is wrong, a bluff. MRT/LRT operators earn a lot from ads -- the whole trains, inside the trains, the train stations, the train posts, etc. -- are all earning revenues for them. This photo I took last December, LRT Divisoria-Santolan route. 

Ads will only come if there is big volume of passengers who can see the ads. Thus, train operators cannot raise the fare too high that will discourage many passengers and hence, discourage the ads.

A zero subsidy to MRT/LRT is possible.

Cong. Colmenares is 5% correct and 95% wrong. He is correct to say that selective subsidy is being done in selective regions or areas in the country but he is wrong to justify such selective favoritism. The train fare subsidy contradicts what many activists are advocating to "spread out" economic activities outside of M.Manila. How can you spread it out effectively when most subsidies are poured on residents of M. Manila? Like this fare subsidy, zero is given to commuters in other regions but P12 billion annualy in MM. See also Manila City, it has the most number of govt hospitals per thousand residents or per sq.m. of land: 3 DOH hospitals + 1 UP-PGH + 6 city-owned hospitals.

A report from Philippine Star yesterday:

From P12 billion, we're lessening the subsidy to 10 billion (pesos)," Lacierda said, adding that the government has to allocate resources away from Metro Manila.

Lacierda said that the P2 billion that will be saved from the train systems will be allocated for projects in Visayas and Mindanao.

"We did not take away the subsidy, the subsidy is still there," Lacierda reiterated.

P10 billion of annual subsidy is still big. It is possible to bring it down to zero. Many regular train commuters will be angry with this of course, but this measure will mean less crowded, more convenient rides for the passengers, and will reduce the animosity of people outside of Metro Manila towards the government and the metropolis residents. The reduction in public debt and reduction in annual interest payment is another positive result  of removing  the  subsidy as the government borrows yearly some P300 B to finance the annual budget deficit.
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See also: 
Transport Econ 8: Removing MRT and LRT Fare Subsidy, March 08, 2013
Transport Econ 10: MMDA and Car Ban, July 18, 2013 
Transport Econ 11: On Fare-Contracting Taxi Drivers, December 13, 2013
Transport Econ 12: Bus Rapid Transit (BRT) and Tricycles, April 21, 2014 
Transport Econ 13: On Prohibiting S. Luzon Provincial Buses to Enter M.Manila, August 30, 2014

Transport Econ 8: Removing MRT and LRT Fare Subsidy

The MRT line from North Avenue in QC to Taft Avenue in Pasay is the most congested among the three urban train systems in Metro Manila. At rush hours, it is relatively common that passengers in midway stations are “bypassed” once, twice or even thrice and wait for the next train as the trains are so packed with so many passengers.

  

There is a new program by the Department of Transportation and Communications (DOTC) to help decongest the trains. They are fielding buses that will pick up passengers at North Avenue station only and stop only at the last three stations -- Ayala, Magallanes and Taft Avenue. The fare is the same, just P15. The fare in normal air-con buses for this route is at least P35. The government says this is a temporary measure until they are able to get new trains.

Ok, what is wrong with this scheme? Or the MRT/LRT fare subsidy in the first place?

One, government gives fare subsidy to commuters of Metro Manila, but not to commuters in other parts of the country, say the cities in Davao, Cebu, Bacolod, Iloilo, Baguio, Tuguegarao. This is another example of Manila favoritism by the Manila-based government.  Thus, it contributes to tax distortion. Taxpayers from many cities and provinces in the country who do not benefit from the subsidized train fare contribute to the fund.

Two,  it promotes bus line cronyism. Give handsome subsidies to the favored bus lines while slapping lots of bureaucracies, fees and penalties to other bus lines taking the same route. Thus, it distorts bus line competition.

Three, it distorts or defeats moves to decongest Metro Manila. The implicit message of the MRT/LRT subsidy and other government programs is this: "You in the provinces, come to Manila. We give MRT and LRT fare subsidy, housing subsidy and free relocation, lots of government hospitals and PhilHealth cards, etc."

Most subsidies violate the rule of law. The latter says the law (like tax-funded subsidies) should apply to all, no one is exempted and no one can grant an exception. So if government should subsidize commuters in M. Maninla, it should also subsidize commuters nationwide, and this is impractical and impossible.  In most cases, government itself is the single biggest violator of the rule of law. We are not talking about the laws against corruption and plunder, robbery and murder.