Browsing by Author "Liwagan, Amelia M."

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    Determinants of agricultural crop production in the Philippines 1960-1975
    (1979-01) Carase, Reynaldo N.; Liwagan, Amelia M.; Herrin, Alejandro N.
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    The Metro Manila bus firm and rate of return regulation
    (1983-04) Liwagan, Amelia M.; Miranda, Casimiro V. Jr.
    The transportation industry is a heavily regulated industry. Just like the other industries classified as public utilities, it is subject to various forms of control one of which is rate of return regulation. By virtue of several court decisions, all public utilities are entitled to a maximum 12 per cent rate of return on invested capital. This paper questions the viability of the set rate since it was first enforced way back in 1932 by the then Public Service Commission and the applicability of the revenue-deficit approach in determining fare adjustments. Based on the financial statements submitted to the Ministry of Transportation and Communications and the Board of Transportation, ten Metro Manila bus firms are found to have earned returns less than the prescribed ceiling although in several cases, the firms earned returns more than 12 per cent. Generally speaking, the rates accruing to bus operators have been very erratic. Moreover, compared to the other public utilities, transport services' rates of return are considerably lower. The revenue-deficit approach used in determining fare adjustments based on a fixed rate of return is also found to have several shortcomings. For instance, it does not differentiate between the relative efficiencies or inefficiencies of various scales of bus operations. The current working definition of the rate of return also has certain operational weaknesses. Returns can be under/overstated by either over/understating costs, under/overstating gross revenues or padding/shrinking the rate base. An estimate of the rate of return actually accruing to the bus operators was computed using 1980 MOTC statistics on gross revenues and load factor. A survey of bus dealers was conducted to come up with benchmark figures on the costs of brand-new and reconditioned buses, as well as major operating and maintenance expenses. Firms were classified according to bus fleet composition. In all the three cases, the firm is found to earn substantial returns on invested capital.