On Wednesday August 20, the Minister of Transport and Works announced that bus fares will be increased for all passenger categories. This was done, he admitted to Nationwide News, without any prior consultation of any affected stakeholders.
There are so many angles to this one. We can look at how all of a sudden power to increase fares is concentrated in the political directorate without any requirement for consultation. We can also look at the justification the JUTC provided for the fare increase and the formula they use to come up with the magic number. I am tackling the latter.
Read this article on why the JUTC says they need an increase. Then let us discuss it.
Roper said the economic cost of approximately $110 for each commuter, without concession, does not include meeting operational costs such as purchasing of spare parts and buses. He explained that this is why another $10 has been tagged on to bring the total to $120.
The JUTC chairman said if the provision of spare parts and maintenance of the buses were taken into consideration, it would cost the JUTC management an estimated $560 per ride to keep the units on the road.
“When the operational costs are deducted, we can live with $110 and put the $10 down as replacement costs at last year’s fuel cost,” said Roper.
The economic cost of a bus ride, per passenger is allegedly J$110 but does not include spare parts. Adding J$10 to the above stated number takes care of allocations for spare parts and buying buses. However, in the same breath, if you take into account spare parts and maintenance, each bus ride per passenger would cost J$560. However, they can live with making 21% of the actual economic costs.
This kind of nonsense accounting is why Jamaicans must reject the fare increase. The JUTC clearly needs the auditor general to return to help them identify the true cost of transporting passengers throughout the KMTR. We have no assurance that next year they won’t try to increase fares again with a view to getting closer to that estimated $560 economic cost. We see a lot on the revenue side, but we have not seen any action on the cost reduction side. They have not yet made a case to us- and why should they- no consultation required.
Roper revealed that the JUTC is expected to save $412 million a year with the introduction of a cashless system on September 1, 2014
He suggested that when the JUTC converts fully from cash to cashless, it would exclude bank charges; security and courier services, as well as leakages and cashiers that would no longer be need to be employed.
“We are looking at all of these efficiencies, including encouraging the elderly, who are being subsidised, to travel during off-peak hours, between 10 a.m. and 2 p.m. when we carry a substantially reduced passenger load,” said Roper.
JUTC is banking on a change in culture to realize savings of 34m per month. I have worked in telecoms for the past decade and know first hand that Jamaicans prefer prepaid. Not only do we love prepaid, but we are most likely to top–up the minimum amount. Therefore, until Digicel introduced $108 cards people would generally top-up with $100. LIME experienced a massive surge in usage when they introduced $100 and $50 data plans. So many people do not have bank accounts or credit cards- because cash is king. You can’t defend a bank tax on one hand saying the most vulnerable do not have bank accounts, but try to force them to adopt a middle-class pseudo post-paid lifestyle.
Do you remember JUTC’s big push to take over all the profitable routes? Do we have a report from the company on the change in revenues since that action was taken? (Spoiler Alert: No)
People do not take the bus because they like the ride, they are using it as a means to an end. Therefore, encouraging seniors (for whom you have
tripled doubled the fare) to travel from 10a to 2p AND use a Smarter Card makes NO sense.
In closing I want to share thoughts expressed by the National Consumer League which at it’s core outlines why a seemingly annualized increase in bus fares is not justifiable. Bear in mind that Civil Servants are under wage freezes (called wage restraint) and the dollar still has more sliding to do according to the IMF Christine Lagarde.
It is time to demand greater transparency. Demand that the JUTC cuts costs and gets creative. Demand that the government offers us something for something- not simply a free 20% increase which by their own admission is not enough to break even.
Isn’t this where we draw the line?