PUV modernization is a must
ROBERT SIY
On October 10, 2018, DoTr Secretary Arthur P. Tugade declared in no uncertain terms that the Public Utility Vehicle Modernization Program (PUVMP) will proceed.
In his words, “PUV modernization should be implemented now…We are not fighting the few. We are protecting the many.” Tugade knows this is a battle worth fighting, because PUVMP is about achieving the greater good for the greatest number.
Tugade’s reassuring words were important to be heard by millions of Filipinos, those in the vast majority—commuters who hope to have more convenient and reliable travel; adults and children who breathe in heavy doses of diesel dust daily; elderly or disabled who struggle to climb into poorly designed buses and jeepneys; and all of us who are concerned about road safety.
PUVMP most important transportation initiative of govt
It aims to replace old, unsafe and highly polluting public transport vehicles (jeepneys and buses) with new, low emission, higher capacity vehicles with electronic devices for real-time information on vehicle locations and enhanced security.
It will also move the industry to a new business model where drivers enjoy fixed salaries and benefits, and all vehicles on a city route operate as “one team” under common fleet management, eliminating dangerous on-street competition.
It is not possible to provide a convenient and efficient transport service based on many small, unorganized bus and jeepney operators, competing against each other. The current fragmented industry structure is one reason why transport services are low quality and why commuters are motivated to switch to private vehicle use.
In the past, the goal of transport industry modernization always ended up in the “too hard” basket. Previous administrations recognized the problem, but considered industry transformation as politically risky—something that would make them unpopular at the polls.
Whenever new standards or rules were proposed for the road-based public transport industry, policy-makers were met with threats of mass protests and strikes. Reform plans were shelved.
This time, DOTr has confirmed that PUVMP will go forward. There is no shortage today of political will. Political will is absolutely necessary, but it is not enough. Other key elements—strong public support and adequate financing–will be needed for the program to be successful.
DoTr will need support
Now is the time to declare that the current state of our public transport system is not acceptable and that Filipinos deserve better. Now is the time to express support for the position taken by Tugade to persevere in PUVMP implementation. Now is the time to commend DOTr’s commitment to pursue the industry transformation.
There are many ways to support PUVMP and other sustainable transport initiatives. Join an organization that advocates for improved people-mobility (or organize one in your community). Educate yourself and others about what affects mobility in your neighborhood. (Follow “Komyut” or “How’s Your Byahe, Bes?” on Facebook to learn about on the state of mobility in our cities). Write to your local and national leaders, including your senators and congressmen, and offer suggestions to improve transport services in your locality.
DoTr will need sufficient funding
Jeepney owners today are concerned about the increasing cost of buying replacement vehicles. The amount currently offered by DOTr to jeepney owners for agreeing to surrender their old vehicles for scrapping is only P80,000 per unit. This amount, called the “equity subsidy”, should be applied towards the purchase of a new vehicle. The P80,000 is considered by jeepney owners as too small and not in line with the market value of their jeepney.
How was this P80,000 amount determined? At the time PUVMP was launched, the government’s financing institutions, DBP and Landbank, formulated a concessional financing scheme whereby a new vehicle worth, say, P1.6 million could be financed with a DBP or Landbank loan, based on a five percent down-payment, six percent interest, and seven -year repayment period.
At the earlier assumed cost of P1.6 million for a new vehicle, the five percent down-payment came to P80,000.00. Hence, the DOTr felt this amount would be sufficient to attract operators to participate in PUVMP.
Today, this offer of P80,000 is inadequate. With the movement in the exchange rate, replacement vehicles are now more expensive. Moreover, the resources of DBP and Landbank alone are insufficient to cover financing needs of the entire PUVMP. Replacing an estimated 200,000 old public utility vehicles will require about P400 billion. To provide this significant level of funding, both government and private banks will need to be involved.
Private banks will charge market rates of interest. They will require down-payments of about 20 percent, which is customary. It is in this context that the amount of “equity subsidy” should be increased to a level that reaches or exceeds 20 percent of the value of a new vehicle.
There are many good reasons for the government to offer at least P400,000 as the “equity subsidy” to jeepney owners towards the purchase of a new vehicle. First, as mentioned, it would enable the jeepney operator to seek financing from private banks. With continuing peso depreciation and worrisome inflation, the cost of a jeepney-replacement vehicle may be close to P2 million by 2019. An equity subsidy of P400,000 would cover the 20 percent down-payment for a P2-million vehicle.
Second, jeepney owners should have sufficient “equity” to have the option to shift to bus operations. High volume corridors like Quezon Avenue or Shaw Boulevard should be served by buses rather than jeepneys. In such cases, five jeepney owners, pooling together their “equity subsidy” of P400,000 each, could assemble P2 million, enough to cover the 20 percent down-payment on a new P10-million bus.
Third, a higher equity subsidy would attract more PUV owners to participate in the PUVMP. Most would see the financial advantage of surrendering their old vehicle so they can claim the P400,000 equity subsidy. If the equity subsidy remained at P80,000, some jeepney owners would choose to retain the old jeepney for their personal use (which would continue to produce emissions lethal to our health and the environment).
Fourth, a larger “equity subsidy” would mean that the operator would enjoy a bigger down-payment for the new vehicle. This, in the end, reduces the total loan amount and the monthly amortization payment. Ultimately, having a smaller loan amount reduces the pressure for fare increases to keep the operators financially viable.
In other words, offering a larger “equity subsidy” is a good alternative to granting a fare increase—especially at this time when the government is trying to contain inflation.
How much public funds should we be willing to spend to modernize the road-based public transport industry so that we will breath cleaner air, vehicles will be safer, the elderly and persons with disabilities will have easier access to vehicles, drivers will not be motivated to compete for passengers, and services will be better organized and regulated?
If the government were to raise the “equity subsidy” to P400,000 for scrapping an old vehicle, and assuming that 200,000 old vehicles were to be surrendered and scrapped, a total budget of P80 billion will be required.
If this transformation were to happen over a four-year period, the annual budget requirement for the equity subsidy over four years would be about P20 billion. Loans from public and private banks will provide the rest of the vehicle financing requirement.
Another P20 billion yearly can cover improvements in public transport infrastructure (such as proper bus stops, signage, lane markings and IT systems) to support the new services. Some of this amount could also cover social programs to address those negatively affected by the modernization program.
In 2018, the combined budgets of DPWH and DOTR is about P689 billion. Wouldn’t it be worthwhile spending the equivalent of six percent of the combined DPWH-DOTR budget (P40 billion out of P689 billion) to create safer and more user-friendly road-based public transport systems throughout the country, benefitting 40 million passengers daily? Absolutely.
This corner echoes Tugade’s message that there is no turning back on PUV Modernization. The urgency is undisputed. The political will is there. The financing is available. The public clamor for better mobility is loud and clear. We all need to work to make it happen.
Robert Y. Siy is a development economist, city and regional planner, and public transport advocate. He can be reached at mobilitymatters.ph@yahoo.com or followed on Twitter @RobertRsiy
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