Chartered Institute of Logistics and Transport fumes over bus fare hike method

Thursday, 23 February 2012 01:03 -     - {{hitsCtrl.values.hits}}

The local arm of the professional body Chartered Institute of Logistics and Transport (CILT) has expressed concern over the manner in which the recent bus fares were increased by the Government.

Given the serious implications of the hike as well as the Government’s apparent deviation from the previously agreed method for revisions, the CILT Sri Lanka said it was necessary for it to express its reservations and concerns.

Following is the full text of CILT Sri Lanka’s letter to Minister of Private Transport Services C.B. Ratnayake with copies to Secretary to the President Lalith Weeratunga and Secretary to Ministry of Finance Dr. P.B. Jayasundera:

The Chartered Institute of Logistics and Transport (CILT) is the premier body of professionals in the field of transport and logistics. We comprise a worldwide membership of 33,000 and GILT SL has been in existence since 1985. Several of our members occupy high positions in both government and private sector institutions in the area of transport and logistics.It has been made necessary at this time to express our concern on the manner in which the recent bus fare increase has been carried out.

Several of our members were involved from the year 2000 when the then Minister of Transport Dinesh Gunawardena appointed a committee to determine a suitable index for bus fare revisions. The report of this committee which was set out as a Bus Fares Policy was accepted by the Minister and the bus operators as well as the representatives of bus commuter associations was submitted for Cabinet approval in 2001.

With the subsequent change of government it was re-submitted by Tilak Marapana and approved by the Cabinet of Ministers in June 2002. Since then, there have been over 15 fare revisions using this Bus Fares Policy with three of them being reductions under several Ministers of Transport.

It has been brought to our notice that the recent bus fare increase of 20 per cent deviates and in fact contravenes the aforesaid Bus Fares Policy and that its implementation has resulted in a higher bus fare to commuters as set out below:

• As stipulated in the Bus Fares Policy, any fare increase of more than 10% should obtain the approval of the Cabinet of Ministers vide a Cabinet Paper. This has not been done in this instance.

• The policy provides for only changes due to fuel price adjustments to be effected before the annual revision in July of each year. The increase due to diesel at this time is around 156%. However a fair increase of a minimum 20% has been granted, thus heaping an additional fare increase of 4.4% on passengers that will be in effect for a period of nearly five months. This extra fare that passengers would have to pay due to this action is calculated at Rs. 920 million.

• When the fares index is applied today it shows that the increase should not be more than 16 per cent. As such the arbitrary action has resulted in a part of a future fare increase being given today. The burden to the public due to this will be at least Rs. 1,100 million.

• The fare increase should be granted from the exact fare as per previous calculated fare. In the case of the first section it was Rs. 6.86 at the last revision which was rounded off to Rs. 7. The 15.6% fare revision should increase it only to Rs. 7.93. Even if 20% was applied for the full Rs. 70 fare it is still Rs. 8.40. As per fare policy fares should be rounded off to the nearest rupee value. Hence the most important first fare stage appears to have been arbitrarily set at Rs. 9, heaping unnecessary burden on the public. As a result, the public will be paying around Rs. 3 million extra per day. If passengers have to pay this till the next fare revision in 2013 they would have paid Rs. 1,550 million more than what they should have paid as per the provisions of the policy.

• Moreover, it has been revealed that the Fare Index has not been used in calculating the fare revision. This is also a violation of the Fares Policy which stipulates no fare revision can be done without using the Index. In 2008 when price of diesel went up to Rs. 110, the fares were increased and then reduced in two stages within six months. This was possible because an acceptable index had been used. In the current context it would be difficult for the authorities to pass on the benefit of any decrease in fuel prices to the passengers unless they use the Fare Index in revising fares at all times.

As a professional organisation it is our duty to ensure that the professional contributions that have been made by our members in the bus sector which have been used for many years for better public service and regulation of the industry be safeguarded.

We are also concerned on the hastily constructed plan to provide a diesel subsidy for bus operators. The CILTSL is aware that many countries provide subsidies for public transport and would like to stress that a plan to grant a subsidy should be implemented only after careful structuring of same.

The plan that has been announced in the media does not encourage increased operation of buses. In fact if a bus receives Rs. 31 per litre for 80 litres per day for 25 days, it will amount to a subsidy of Rs. 62,000 per month or Rs. 744,000 per year. This is a substantial amount of money. In fact an owner will find it more profitable to keep the bus parked at home and to collect the subsidy by forwarding false claims than operating it. There is no auditable system that prevents him from doing so. The payment of subsidy on the above scheme would amount to a burden on the public if such do not translate to actual services rendered especially since the subsidy as announced would require in excess of Rs. 15 billion in subsidies per year which again the public would be required to pay. We are also made aware that work in this respect to set up working time tables and route based companies that could have certified the operations was inaugurated in 2007 under former Minister Dulles Allahapperuma but have recently been suspended. As a result, the public today have been deprived of being provided a subsidy. Higher bus fares will also drive passengers to private transport thus creating loss for the industry and will also lead to increased road congestion that will cost the economy even more.

We call on you to consider correcting the bus fare revision after proper application of the Bus Fares Policy including the reduction of Rs. 9 for the first stage to Rs. 8 and the reduction of the overall increase from 20% to 15.6% bearing in mind that failure to do so will result in bus passengers unduly compelled to pay an additional Rs. 3, 580 million and will lead to negative impacts for the entire transport sector.

The setting up of an auditable system of providing subsidies based on published timetables and proper management of routes must also be resumed.