Sun | Apr 23, 2017

EDITORIAL - Stand firm on fare hikes

Published:Friday | August 22, 2014 | 8:00 AM

No one can, up to now, accuse Andrew Holness of leading a recklessly disruptive Opposition. But the Jamaica Labour Party (JLP) leader is in danger of crossing the Rubicon with his threat of demonstrations against a hike in bus fares for the Government's Jamaica Urban Transit Company (JUTC). Indeed, his posture reeks of the old politics of unreason.

In fact, if Mr Holness were able to look beyond the political gains of noisy, opportunistic populism, he would keep his mouth shut, quietly celebrate the decision of the Simpson Miller administration, and urge them to take similar action in other areas of the public sector that gobble up huge amounts of subsidy. That would free Mr Holness from some of the nastier, but necessary, tasks should his party return to government at the next election.

Alternatively, Mr Holness, if he thinks it possible, might offer strategies for keeping or lowering the current rates, while maintaining or raising existing service standards, even as the company breaks even or makes a profit. These strategies might include divesting the JUTC.

The JUTC did not disclose the average fare increase, based on the weights of its various categories of passengers, who pay different rates, on its overall loads. But the hikes range from 20 per cent for adults, to 200 per cent for the elderly, who, nonetheless, will pay 50 per cent of the 'normal' rate. Students and disabled people face a 50 per cent rise.

The background to these adjustments is important, including the genesis of the JUTC nearly a decade and a half ago, when the capital's public transport system was even more shambolic and every bus ride was the high-speed version of the Middle Passage experience. The JUTC was to be a transport operator worthy of a modern, productive city. Except that, as is too often the case when politics intrudes on economics, its service was severely underpriced.

It is not surprising, therefore, that it lost huge sums of money, burdening taxpayers with an accumulated deficit of more than J$12 billion, notwithstanding approximately a $4.5 billion in cash subsidies over the past decade and another J$16 billion of capital injections. That is unsustainable - especially given Jamaica's crisis of debt and the prudence demanded by the IMF-supported project to rescue the economy.

Business overhaul

Happily, the JUTC is overhauling its business. It has put additional buses on its routes, improved the reliability of its service, and reduced thievery by staff. Unfortunately, last year when bus fares were increased by half, the Government did not go far enough. So, despite a substantial increase in revenue recently, a larger fleet and rising costs have meant a steep jump in operating costs, translating to a 22 per cent increase in its loss for the first four months of the fiscal year. On the current trajectory, the company was heading for a loss, this fiscal year, of near J$2 billion. A crude estimate of a 30 per cent increase in revenue would, all things being equal, mean between J$1.3 billion and J$1.5 in additional income, potentially reducing the JUTC's loss to a more manageable $500 million.

The administration has done a lot of the hard work and made tough political decisions, including this one. Prime Minister Portia Simpson Miller might be inclined to make minor adjustments, but there should be no broad retreat. Too much has been achieved to squander the effort.

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