On Trains and Tribulations: The LRT South Extension and Fare Hikes

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The Light Rail Transit Line 1 South Extension Project is now out for bidding, with the contract to be awarded in the second quarter of this year. The rail system is under intense public scrutiny amidst talks of fare hikes, but as in most cases, a look at the data can lend some meaningful context to these debates: fare hikes, capacity constraints, and South Extension feasibility.

TJ Palanca https://www.twitter.com/tjpalanca
01-19-2014
It's a fact of life in Manila that you won't really know when you'll arrive at your destination, resulting from intolerable congestion and poor public transport, a problem that has gained political traction in recent years. In this photo, an LRT-1 train arrives at Blumentritt station. (Photo: public domain/Wikipedia)

Figure 1: It’s a fact of life in Manila that you won’t really know when you’ll arrive at your destination, resulting from intolerable congestion and poor public transport, a problem that has gained political traction in recent years. In this photo, an LRT-1 train arrives at Blumentritt station. (Photo: public domain/Wikipedia)

President Aquino’s talk of the need to raise fares on the Manila’s transit system in his most recent State of the Nation Address sparked intense political opposition, and as a result the fares have stayed put. Now, the LRT-1 South Extension project to Cavite is up for bidding through the Public-Private Partnership scheme, bringing rapid transit to the southern suburbs of Manila. Valued at around P63.55 billion, the project is the biggest infrastructure project of the current administration.

All this leads us to ask some important questions: (a) we all know that prices should rise with wages and government susbidy distorts incentives, but should fares really rise to as much as P40 per trip?, (b) can the existing line handle all those new commuters from the south in 2015?, and (c) what about the other lines? We can try to provide some answers through data.

Substandard Subsidies

The President states that the true cost of riding the LRT is at around P40, meaning that P25 has to be shouldered by the government for each commuter. Let’s take a quick look at some LRT financial data:

As you can see, the throughout the past four years, ticket revenues (revenues gathered from the P15 paid by each commuter) have pretty much run in place with the operating and maintenance expenses of the rail line. The farebox ratio (the proportion of O&M costs covered by ticket revenues) has hovered at just above 1.0.

What does this mean? Other expenses notwithstanding, the rail line operates at its current state with a P15 ticket price (take note: current state). The P25 that the government pays goes to expenses other than regular operation and routine maintenance, such as replacement of spare parts and rail equipment, as well as capital expenditure, according to a reader who has worked on the LRTA/DOTC on these projects. (Thank you to the reader for pointing out that it was not, in fact, going to debt service, as alleged by some ideological groups.)

This is why the ‘acceptable’ farebox ratio doesn’t mean that the LRT is operating fine. Raising the farebox ratio provides financial capability to improve and better maintain existing equipment. Expenses, especially maintenance, may have been kept down, resulting in substandard service. Frequent breakdowns and delays are but a symptom of cost cutting due to the inability to raise fares.

Capacity Conundrum

It doesn’t take data to figure out that the LRT is reaching the stage of severe overcrowding. Couple that with increased volume from the south extension project, and rush hour commutes can turn into complete nightmares.

The peak-load factor, a statistic that measures the usage of train capacity during rush hour breached 100% during the summer of 2013. I have no idea how you can breach 100%, but it did, and I just chalk it up to Filipino ingenuity. What data can answer for us, though is why this is so.