The hike in fares

The hike in fares

Raising the price of public services is obviously never a popular measure, however essential it may be for the maintenance and improvement of service providers. That has always been a dilemma faced by the government. The hikes in land, sea and air transportation fares, announced by the government yesterday and effective as of today, is particularly saddening, affecting as it does the vast majority of Indonesians, notably those on fixed incomes. And by the very nature of the industry, the impact will be much more extensive than would appear at first sight, since transportation is a key production cost for almost all goods and services.

The general public also may be perplexed by the fare hikes because fuel prices -- which are usually the main reason for increases -- have not been raised since 1993. However, Minister of Transportation Haryanto Dhanutirto explained yesterday that fare hikes are imperative to maintain adequate, comfortable transportation services, because the old tariffs didn't come close to covering the production costs of the companies involved.

We should remember that transportation is not subsidized by the government. Hence, service providers -- both public and private -- should be allowed to make enough money not only to cover their costs but also to enjoy a reasonable profit, or nobody will be willing to plough any money into the industry.

We feel there are several reasons that speak for an increase in transportation fares. First of all, transportation fares were last raised in January 1993, right after an increase in domestic fuel prices. Adjusted for inflation over the last three years, fares have actually declined by almost 30 percent in real terms.

Secondly, all vehicles have a foreign exchange component which means that their capital and maintenance costs have been rising with the depreciation of the rupiah. Moreover, transportation firms have to pay their employees at least at the government- mandated minimum wages.

Haryanto argued that fares were hiked not only to benefit transportation companies but also the general public as consumers. This is implicit in the structure and range of the increases. For example, bus fares for school children and students remain unchanged at Rp 100. City bus fares were raised by a range of only 20-33 percent, compared to the 66.67 percent rise in taxi fares. Inter-city bus fares were increased by a range of only 12-25 percent while domestic air fares were increased by a range of 14.7-20.07 percent.

The government, however, should see to it that the objective of the fare increases -- expanded and better services -- be achieved. Tighter supervision is necessary to ensure that transportation firms conform with traffic regulations. That also requires better pay for employees, to discourage the reckless driving-- the main cause of traffic accidents.

But fare hikes alone are unlikely to improve services much while companies have to shoulder the burden of bribes. Bus companies have often complained about the exorbitant sums they have to pay for route permits and about bribes collected by police and highway patrol officials at stations and along the roads, but to no avail.