Are fare increments by public service vehicles justified?

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

25 June 2006

In response to the Sh3.20 per litre added to the cost of fuel in this year’s budget, urban public transporters have increased their fares by sh5 or sh10 depending on the route distance. Commuters insist that the increments are not justified and they are blaming the finance minister for making life even more difficult for them. In his speech, the finance minister said that he did not expect any increase in transport charges because rise in fuel prices was compensated by the cancellation of annual road licences. Among the three, who is right? Let the numbers speak:

First, let us simplify the problem. Suppose that fuel is the only operating cost in a vehicle (that is, ignore things like insurance, loan repayments, depreciation, salaries etc). Before the budget speech, the price of petrol was about sh75 per litre and that of diesel was sh65.

The minister added sh3.20 to these prices. This is equal to 4.3 percent for petrol and 4.9 percent in the case of diesel. With the above assumption, we would expect the operating cost to increase by the same margin - at most 5 percent. Therefore, the fares should also go up by a similar proportion. That is, from, say, sh20 to sh21 and from sh30 to sh31.50. Only the fare that was sh100 should rise by sh5 to sh105.

We have obtained the result by assuming that fuel is the only operating cost. But that is not true. There are other costs and they vary from one operator to the next. It is therefore difficult to determine these other amounts thus we will turn the problem around and track down the cost of fuel alone and relate it to the fare.

Consider a 14-seater van with an engine in fairly good condition. Under normal operating practice (harsh accelerations, hard breaking etc.), the vehicle probably yields about 5km per litre of fuel. Now the average urban trip is about 15km one way. Thus the van consumes approximately three litres of fuel on the journey.

When the price of fuel went up by sh3.20, the operating cost of the trip rose by a total of sh9.60 (three litres multiplied by the sh3.20 increase). This increment is to be shared among all the passengers carried by the van. It is tempting to divide the whole amount by the 14 seats, but that wouldn’t be fair.

Ordinarily the van does one trip at full capacity and the return journey at about 50 percent. Therefore the average occupancy is about 75 percent, that is, 10.5 passengers per trip. Thus the average fare increase due to fuel cost comes to sh9.60 divided by 10.5, equals 91 cents per passenger. That is, less than a shilling.

It would be interesting to find out what increase in the price of fuel would yield a sh10 rise in fares. The answer is sh3.20 multiplied by sh10 divided by 91 cents. This is equal to about sh35.

That is, it is only if the price of fuel went up by sh35 that the operator would justify a ten-shilling increase in fares. Thus to find out if you are being cheated, compare what you are paying today to what you were charged when the price of petrol was sh45 (today’s sh80 per litre minus sh35).