The purpose of the NGV bus rental project of the Bangkok Mass Transit Authority (BMTA) is to reduce the operational losses of the BMTA, which have presently accumulated to more than 70 billion baht in total. The Minister of Transport also claims that steeply increasing diesel fuel prices will aggravate BMTA’s losses, to the tune of 140 billion baht in the next ten years. However, according to the Minister, replacing diesel buses with NGV buses will lower costs, and reduce accumulated losses for BMTA by 50 percent in the next ten years.
The BMTA and the Ministry of Transport have tried to replace diesel buses with NGV buses because the price of natural gas is far cheaper than the price of diesel. According to BMTA statistics in 2006, NGV bus costs were lower than other bus costs by 30 percent, with the cost gap this year being definitely wider than in 2006 due to rocketing diesel price increases.
After analyzing BMTA’s balance sheet for 2007, I have discovered that a decrease of BMTA’s fuel costs by 30 percent, is equal to a decrease of 2,268 million baht. Added to the nullification of 1,915 million baht in maintenance costs (NGV buses are rental buses, thus maintenance costs are unnecessary), these cost reductions would still fail to surpass BMTA’s 2007 loss of 5,882 million baht. Therefore, if this project fails to turn the current scenario of double accumulated loss into BMTA’s daydream scenario of eliminating possibly half the accumulated loss within the next ten years, it would require about 3,500 million baht in annual profits, after structure adjustment.
From this, it can also be implied that in order to improve BMTA’s financial situation, some other revenue sources must render the amount of about 5.2 thousand million baht per year. In other words, the BMTA must coerce its passengers to paying the Authority’s debts.
The project’s losers are its poor passengers, who after the project is implemented will be unable to take non-air-conditioned buses for a transportation fare of 7 baht. If the project is approved by the Cabinet, all non-air-conditioned buses would be replaced with NGV buses and all passengers compelled to pay a minimum fare of 15 baht. This means that poor people who used to take non-air-conditioned buses must pay a double fare rate, while, in fact, transportation costs have decreased by at least 30 percent.
The BMTA may use the excuse that their fares are actually cheaper than the current bus fares of air-conditioned buses, which lie between 14 and 22 baht. However, in fact, low-income passengers often take non-air-conditioned buses for short distances since they will usually live near their workplaces, while middle-income people often take air-conditioned buses for long distance journeys. For this reason, a flat-rate fare of 15 baht may not only be deemed a transfer of MBTA’s debt payment burden onto low-income people, but is also taking their money in order to subsidize middle-income people who live at the outskirts of the city.
Dr Kriengsak Chareonwongsak
Senior Fellow, Harvard Kennedy School , Harvard University
kriengsak@kriengsak.com, kriengsak.com, drdancando.com
Senior Fellow, Harvard Kennedy School , Harvard University
kriengsak@kriengsak.com, kriengsak.com, drdancando.com
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