Editorial | Let OUR set fares

Daryl Vaz’s announcement of a two-stanza increase in bus and taxi fares was, in part, the minister’s attempt at an illusionist’s trick that made inevitable the frustration and cynicism that have been displayed by transport operators.

The development again highlights the need for a new system, outside the realm of political consideration or control, for the determination, and regulation of transportation fares.  It also further underlines the recent suggestion by The Gleaner’s Editorial Board that Minister Vaz move with urgency in drafting and publishing of his promised national transportation policy.

The illusionist bit!  The-16-per-cent hike in fares, which is to be implemented in two tranches - the first eight per cent came into force on June 2, the second portion will take effect on July 1 -  is not new.  It is over two years late. Which is part of a pattern of how the government, across political administrations, has managed rate increases to private operators of public transportation.

For instance, for eight years, up to 2021, the island’s bus and taxi operators did not receive an official fare increase. Any adjustments were of their own doing, to which the authorities largely turned a blind eye.  In August of that year, transport operators were finally granted a 15-per-cent upward adjustment, with the understanding that another 10 per cent would follow in 2022. The second tranche never came.

Two years later, in October 2023, the government approved a 35-per-cent fare hike - again to be introduced in two tranches. The first 19 per cent took effect at the time of the announcement. The remaining 16 per cent was to be implemented on April 1, 2024, coinciding with the start of the new fiscal year.

However, before the second adjustment happened, Transport Minister Vaz, and the then finance minister, Nigel Clarke, leaned on the operators of buses and taxis to hold strain.

Dr Clarke argued that the freeze was necessary to contain inflation, then galloping at 10 per cent, within the central bank’s target of four to six per cent.  Transport operators grumbled but complied. Many intensified their cutting of corners.

FARE REDUCTIONS

Yet, at the same time the administration implemented fare reductions of up to 50 per for buses operated by the government’s Jamaica Urban Transit Company (JUTC), adding another J$2 billion to the J$11 billion that taxpayers already provided to the company. For the current fiscal year JUTC is projected to run a deficit of J$18.8 billion, before a direct injection of J$11.1 billion that will lower its reported loss to J$7.7 billion.

While this week’s 16 per cent fare increase is, in effect, a long overdue payment, in real terms transport operators are getting less than what they are ‘owed’.  The increase does not factor in inflation, measured by the consumer price index (CPI), for the past two fiscal years. 

According to the Statistical Institute of Jamaica, for the fiscal year that ended March 31, consumer prices rose 4.3 per cent, following a five-per-cent hike the previous fiscal year. There is, of course, the compounding effect of these upward movement in prices, which have been further impacted by recent rises in energy and commodity prices because of the US/Israeli war on Iran.

There is little doubt that Jamaica’s private bus and taxi operators provide a mostly undisciplined, and largely ramshackle, service.  They often endanger the lives of commuters and other road-users. Route taxis notoriously bore and jostle and disobey most traffic rules in their hustle for fares.

It is not without merit to argue that this behaviour is partly a response to the economic environment in which transport operators have been forced to operate by fare freezes.  In any event, uneconomic fares make it harder for the authorities to impose discipline on the system.

TIP-TOED

Governments and opposition parties have tip-toed around the issues for fear of upsetting two important voting constituencies, the more than 30,000 registered taxi and bus operators and their families and the hundreds of thousands of commuters who use public transportation daily. This is apparent in the messy fare-setting regime that the government has used since the 2010s. 

It is also evidenced in the gobbledygook of a statement issued this week by the opposition spokesman for transport, Mikael Phillips, attempting to be seen as promoting the interests and commuters and transport operators. Instead, Mr Phillips said little that was sensible.

There is much to be sorted out in public transport, which makes Mr Vaz’s green paper urgent.  In the meantime, to prevent or contain the political impulses that have propelled the freezes and reneging on commitments that have been features of recent fare adjustments, the fare-setting process should be returned to the Office of Utilities Regulation (OUR), which should make rational adjustments, based credible economic information, within specified timeframes.

If after an OUR determination the government wishes to provide subsidies to transport operators on the basis that their service is a critical public good, then so be it. But asking private transport operators to subsidise commuters, which is the real effect of fare freezes, is not the way of markets.