April 2008

TAXI FARES AND LPG PRICE

Some say that good things come to those who wait. However, sometimes the waiting can be worrying, frustrating, disappointing, costly, and many other things.

So it was with the adjustment of taxi fares to compensate taxi operators for the increased price of LPG.

The referral by the Minister for Public Transport to the Essential Services Commission (ESC) early January called for the matter of LPG price and taxi fares to be examined and recommendations presented to the Minister by the end of January or shortly thereafter. The ESC recommendations were not presented to the Minister until mid March.

Some suggested that the examination should have been pretty simple and that a quick look would have shown that because LPG price had increased by between 40% and 60% over the last seven or eight months, it should be easy to determine the increased cost of operations on an average trip basis.

But, it seems that the examination was, or was made to be, somewhat more rigorous than a “back of an envelope” calculation to address a crisis situation. Perhaps the matter was complicated by the broader review of fares being undertaken by the ESC to establish a new fare model for 2008 and the next three to five years.

Whatever the reason for the agonizing time taken, taxi operators across the State were anxious about the delay and the impact the price of LPG was having on their businesses.

Negative cash flow and an inability to “pay the bills” being common place.

So concerned were operators that some were calling for protests in the streets, and some were on the verge of putting their taxis in the garage and looking at alternative income options. On at least three occasions some operators were planning to bring central Melbourne to a standstill. It was suggested that many operators would ignore the F1 Grand Prix at Albert Park.

On 19 March the Minister for Public Transport announced that the ESC had recommended a 4.2 percent interim fare increase. This recommendation was accepted by the Government. (See the Minister’s media release in this Taxi Talk.)

At the time this article was to go to the printer details of the basis of the ESC recommendation and the implementation arrangements were not available, so whether or not the outcome is a “good thing that was worth the wait” is still to be analysed.

But what is clear, is that the 4.2 percent increase in total fare box revenue is to offset the increase cost of fuel and the cost of changing the taxi meter - it is the taxi operator who pays for the fuel and the meter change.

This interim increase is not based on increasing driver income, nor is it a reason for licence holder assignors to increase licence assignment fees.

If an assignor attempts to increase the assignment fee because of this interim fare increase, the lead could be taken from the ACCC where Graeme Samuel suggested a “name and shame” approach be taken in regard to oil companies and service stations that step over the mark on petrol prices.

Neil Sach
VTA CEO