LE 395 million annual budget likely insufficient to generate profit
CAIRO: Minister of Finance (MOF) Youssef Boutros Ghali approved Saturday a 16 percent increase in the General Transportation Authority s (GTA) annual budget to LE 395 million to avoid raising ticket fares as a result of the recent increase in fuel prices.
Ghali s decision comes as the government continues to resist privatization of public transportation companies while encouraging public-private partnerships (PPP) to construct new projects in order to keep services affordable to limited income groups.
GTA bus fares range from LE 0.25 for older vehicles to LE 0.50 for newer ones introduced in 2004, regardless of trip distances.
In addition countering the effects of increasing fuel prices, GTA Chairman Salah Farag says extra funding will be used to increase maintenance capacities, but will not be enough to turn a profit for the authority. Although GTA s losses are never formally disclosed, they are believed to be in excess of LE 80 million annually.
In July the government lifted a portion of its fuel subsidies causing a 30 percent increase in gasoline prices. On the other hand, it awarded the Ministry of Transportation (MOT) $5 billion (LE 28 billion) to upgrade the country s century-old railway system after two trains collided in Qalyub, killing 58 and injuring 144.
Increasing fuel prices have also been cited by government and independent economists as the driving force behind the continuing rise of the annual inflation rate, last reported at 11.8 percent in October.
Minister of Transportation Mohamed Mansour says PPP programs let the government maintain ownership and regulatory authority while allowing the private sector to provide better services at lower prices. Although PPP programs differ in structure depending on the type of service provided, they typically allow the government to lease its assets to the private sector for a fixed period of time. Private companies then develop and operate projects according to their agreement with the government in return for annual fees to be paid by the government.
How can a railroad that loses LE 1.6 billion every year for the past four or five years become self sustained? says Mansour. [With] the participation of the private sector, we are going to be self-sustainable and we will break even in four years.
In order to become self-sustainable and preserve low fares for low-income passengers which make up the majority of railway volumes, Mansour says MOT will focus on increasing freight capacity, raising first class fares, and utilizing the Railway Authority s assets which include 190 million square meters of land either for commercial leasing or advertising. Railways now haul 12 million tons per year using just a handful of locomotives, says Mansour.
In GTA s case, PPP programs have been used to expand the authority s bus network within the Greater Cairo Governorates and to new cities such as El Shoruk, El Obour and New Cairo, although private companies operating under the program are allowed to sell tickets starting at LE 1 to LE 2.
Farag says the authority will likely seek private investment to modernize the Heliopolis metro line after the World Bank s International Finance Corporation agreed to provide it with a LE 50 million loan.
