Commuter fares in Rwanda could rise over high fuel prices

Sunday December 3 2017

Passengers boarding a bus in Kigali. Fleet

Passengers boarding a bus in Kigali. Fleet managers say the fare structure review should consider other operational costs besides fuel. PHOTO | CYRIL NDEGEYA  

By JOHNSON KANAMUGIRE
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Transport operators in Rwanda are pushing for a comprehensive fare structure review and cite market developments that significantly impact the cost of operations in addition to a significant rise in fuel prices.

Sector regulator Rwanda Utilities Regulatory Agency (Rura) recently announced the possibility of a review of commuter fares to reflect the changes in fuel price, which have risen past the maximum reference price of Rwf959 ($1.14) per litre.

However, fleet managers say the fare structure review should consider other operational costs besides fuel. Pump prices for petrol are around Rwf1,031 ($1.23) and Rwf994 ($1.18) per litre of diesel.

According to operators, although these inputs account for nearly 70 per cent of their daily operational costs, the fare structure review should factor all costs including currency depreciation.

They argue that the existing fares set in November 2015 when the dollar was at Rwf550 ($0.65) remained unchanged despite the dollar having risen to Rwf850 ($1.01). This translated to higher prices for inputs such as spare parts.

Loans

“Besides fuel, everything else we spend on like spares and other items increased by more than 30 per cent. This is not taking into account loans, taxes and other expenses. Operators are not making profits, which is why we are looking forward to the fare review,” said Nille Muneza of Royal Express.

The depreciation of the franc is said to have increased the financial burden on majority of operators. This is because many of them bought vehicles on loan and their cost in francs increases with every depreciation.

Specific details of losses suffered were not readily available but operators said they were compiling the data in a bid to use it to persuade Rura to revise the tariffs upward.

Under the previous fare structure review carried out in November 2015, commuters had to pay Rwf1- Rwf2 more per kilometre, putting fares at Rwf20 ($0.02) in Kigali City and Rwf19 ($0.02) per kilometre for upcountry routes.

At the time, prices of fuel stood at Rwf888 ($1.06) per litre, but have since increased by about Rwf140 ($0.17).

In its 2016/17 report, Rura said the cost did not go beyond the pre-set margin of variation, which is the reason the transport fares were not reviewed.

Concerns

Eric Ruhamiriza, the chairperson of the public transport owners’ association said individual transport companies are the ones who had approached Rura about the issue.

Patrick Nyirishema, the director-general at Rura said the concerns raised by operators were valid because a lot had changed since the last fare review.
He cited significant changes in the exchange rate, which has had an impact on input costs.

He said inflation and vehicle maintenance costs had also decreased the operators’ profit margins. He said all these aspects would be considered at the ongoing stakeholder consultations, which would inform the new tariff.

“The tariffs are mostly based on input costs, so we need to review and see if there has been any change in the original parameters which we used to arrive at the current tariff,” said Maj Nyirishema, adding that he expected the new tariff structure to be announced in early 2018.

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