RATINALIZING THE SUBSIDY ALLOCATED TO MASS RAIL TRANSITS:

THE CASE OF METRO RAIL TRANSIT LINE 3 IN EDSA

PHILIPPINES

RUZETTE MORALES - MARIANO

hiI come here with four objectives which I

will identify as we go along.

1 - provide you a quick but concise history of MRT3

2 - Identified the concerns and issues

3 - Solutions on the part of subsidies provided for Urban

Mass Rail.

4 – Provide other observations

The Metro Rail Transit Line 3 (MRT 3) in EDSA

1990 Build-Operate-Transfer Law (BOT Law) was signed

1992 Feasibility Study for the MRT Line 3 was submitted for evaluation

1996 After a series of revisions in project cost and scope, the project was approved

1997 The BLT Agreement was signed

1999 The project became operational

BOT scheme adopted Build-Lease-Transfer Scheme (25 years)

Total project cost US $ 675 million

Passenger (opening yr) 450,000 pax/day

Forex US$ 1 : P26.50

No Bus Rapid

Transits introduce

d in developin

g countries

The Epifanio de los Santos Avenue (EDSA) stretches 22 km from the Monumento Circle in the north to Taft Avenue in the south, serving as a major backbone of Metropolitan Manila’s road transportation system.

Langen, Alzate and Talens recorded that a daily 14-hour traffic count rendered approximately 100,000 per car units of vehicles, reaching 150,000 in the Shaw/Ortigas Section.

Cars approximately demonstrate 2.8 occupancy (source: DPWH) while buses at 44 (50% of capacity).

BUS ROUTES NO. OF OPERATORS

NO. OF VEHICLES

EDSA Route 87 2,660

Non-EDSA Routes 32 764

METROSTAR EXPRESS

(MRT Line 3)- Serves a 16.9 km long corridor from a terminal station in Taft Avenue

(interconnecting Light Rail Transit 1) going up north and terminating at its depot station in North Avenue. It has 13 stations generally 1 km apart from each other

- The system sits on the middle of EDSA (tracks: 52% elevated, 40% at-grade and 8% sub-grade)

- Langen, Alzate and Talens (2005) recorded that the actual maximum capacity of MRT 3 is 24,000 pax per hour per direction rather than the approximate of 33,000 pphpd indicated in the MRT Line 3 Feasibility Study

- Under the BLT Contract, Metro Rail Transit Corp (MRTC) construct the system, lease the infrastructure to government (via DOTC). Maintenance of facilities and rolling stock are delegated to MRTC subcontractors.

Concerns Associated with MRT 31.) Already at its peak capacity of approximately 400,000 pax/day

expansion by procurement of additional train units is becoming a need to maximize the benefits of the system.

2.) The loop is yet to be connected (to complete the Mass Rapid Transit Network for Metro Manila)

3.) Market risks are borne by government

Concerns Associated with MRT 3

Most importantly, there is huge amount of subsidy required to cover the capital cost as well as operations and maintenance costs.

Financial Summary of MRT Line 3 Operations (figures in million Pesos unless specified)

CY 2003 CY 2004 CY 2005 TOTAL EXPENSES 6,500.00 6,700.00 8,000.00 REVENUES 1,600.00 1,800.00 1,900.00 Development Rights Revenues 12% 17% 17% Farebox Revenues 88% 83% 83%

Amount Being Subsidized by the Gov't 44.23 39.94 49.57 Pesos

per Passenger 0.88 0.80 0.99 USD

Total Ridership 112,653,067 122,483,642 121,753,952

Since these are very costly, these impose pressure on raising the fare level. This is however, hard to implement on the political point of view.

Identifying and Addressing the ProblemGrowing transport demand

Which may lead to congestion and air pollution costs in

the next 10, 15 and 20 years

Expensive subsidies provided to chosen alternative (MRT) there could be alternatives that could meet the required

level of service provision in terms of traffic congestion

The population of good policy makers understand these issues. However, as policy makers they are almost always required to take action

NOW

They have clamored for guidance on the reasonable level of subsidy that could be allocated to the existing line in the interim, between now and

the time when actions to address the above stated problems are implemented

MRT Expansion

BRT Provision

Etc.

Period Fare

Structure Ridership Sales

Rate Increase (%)

Dec 15 1999 to Jan 31, 2000

17.00-34.00

21,873

668,209.96

Feb 1 to Jul 19, 2000 12.00 - 20.00

51,485

880,695.29

31.80

July 20 - Dec. 31, 2000

183,248

2,311,794.46

162.50

Jan. 1 - Dec 31, 2001

249,429

3,085,316.64 33.46

Jan. 1 - Dec. 31, 2002

282,993

3,457,326.26

12.06

Jan. 1 – Dec. 31, 2003

312,043

3,830,841.76

10.26

Jan. 1 – Dec. 31, 2004

338,431

4,162,076.10

8.46

Jan 1 – Mar. 12, 2005

9.50 - 15.00

426,844

5,215,548.80

26.12

Source: DOTC

Proper pricing of railway facilities is

obviously one of the direct ways of

influencing the level of subsidy and

changing the behavior of your road and rail

based traffic.

Policy Variable

Direct Elasticity

% of Demand Distributed to Alternative Modes

MRT BUS CAR

MRT Fare Increase -0.7071 0.5221 0.0209

MRT LINE 3 FARE AND RIDERSHIP HISTORY

DEMAND ELASTICITY FOR CURRENT MRT 3 RIDERS

Source: Martinez, 2002

Findings show that demand elasticity for

MRT 3 is high

MethodologyHow do we help the good policy makers? By understanding the financials of the MRT system and by looking at what price is proper to implement to minimize subsidy level provided

For a population of rail riders who are highly sensitive to increases in price, the way to understand the rail traffic behavior is by first understanding road traffic since it is rail’s nearest competitor.

To quantify the effects of road traffic congestion and how a rail transit or any other transit system can address traffic congestion, the Marginal Social Cost of road transport and demand functions should first be estimated.

MethodologyObjective Specifics EDSA

Estimating Cost Function

Road Congestion

Using Roth & Villoria’s model:

V = 49 – 0.234 q v = speed

q = pcu volume

Air Pollution

Estimated PM10 emissions using the two-fluid model

Estimated PM10 concentration using

c = 0.0034 x Q (model by Villarin & Narisma)

c = concentration (ug/m3) Q = emissions (g/day)

Estimated dose-response relationships for the cities of Mandaluyong, Quezon and Pasig

Estimated the economic cost of pollution using the benefits transfer of the effects of morbidity & mortality due to air pollution.(prices at 2006)

Findings

Objective MRT EDSA

Estimating Demand Function

Using Martinez’s 2002 demand elasticities

Using Roth & Villoria’s model:

V = 49 – 0.234 q

v = speed

q = pcu volume

Modes RUC HealthExternality (w/o air pollution effects)

Externality w/ air pollution effects

Cars 1,057,53012,384,573,117

504,436 12,385,077,553

Buses 1,328,910 838,529 12,385,411,646

ROAD TRANSPORT EXTERNALITY:

Findings- Fare level was increased by increments of 5% from a base of P9.50 – P15 (average fare = P12.25). The optimal fare rate is at around P14.40 – 19.90 (ave fare = 17.15). At fare level renders the lowest subsidy level of P6,449 million.

- The increase in fare to an average of P17.15 may not result to heavier traffic volume and higher road congestion. Of the total passengers who will decide not to use MRT 3 after this fare increase, 52% will revert to use buses and only 2% will resort to car use. They can still be absorbed by the existing road vehicles.

> According to the survey conducted by Alzate (2003), 99% of the respondents stated that they have no available private car for the trip. However, 26% responded that they made the same trip as a car passenger before. Hence it is possible that MRT Line 3 users will resort to being car passengers (car-pool arrangement)

> Those going back to buses can still be absorbed by the buses at a certain level (approximately 60,000 pax at peak hour, 130,000 at non- peak hour)

Findings-On the average, car speed is at 32 kph while bus speed is at 24 kph. Due to queuing and other reasons, actual running speed of buses is a half of the total running speed.

-Actual running speed for cars is around 5% faster than recorded travel speed.

- Buses pollute more than cars do.

-Hence the challenge is on making your efficient transportation modes (buses vs. cars) more effective in addressing sustainable transport development.

TypeAve Speed

NB

Ave Speed

SB

EmissionNB

EmissionSB

Total Emissions

% of Bus + Car

% of Bus+Car+ Truck

and others

Emission per pax

Car 32.65 30.74 12.02 12.99 25.01 37% 24% 8.93

Bus 23.69 23.48 20.41 21.68 42.09 63% 40% 1

total emissions 32.43 34.67 67.10  

Recommendations

Subsidies can be justified if costs due to air pollution are considered. Otherwise no.

The strategy for the transit system is to gradually raise the fare price and replace the lost passengers with car users through well planned feeder services.

Before deciding to commit to a huge investment project such as railway, make sure you explore all the existing options and alternatives.

Make sure that the specifications of the project are addressed towards the interest of your target market. If you desire that car users use public transport, make sure that the service provided by the public transport is good enough to match the private benefits car users derive from using cars at the least (Plan your feeder routes, park-and-ride stations etc. in accordance to their needs).

Recommendations

Draft your contracts clearly and without bias.

Choose the one that can deliver the appropriate and desired level of service at the lowest cost. But make sure the planned level of service is delivered at the utmost.

Recognize the value of exposure and information dissemination. Invest in your institutions in this terms. Invest in your agencies who turn out to be proponents of your projects. Make sure they are aware of the options available around. If you can not do this, hire experts who can.

Show that we learn from past mistakes. Do not let history repeat itself.