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A Fiji economist has proposed an environmental fuel surcharge as an indirect way of curbing the rise in the volume of private transportation on Fiji’s roads.
Dr Mahendra Reddy said Fiji had experienced an increase in vehicle registration leading to motorisation.
“We need to push people from using private vehicles to public vehicles,” he told a transport sector consultative forum in Suva yesterday.
“Moral suasion or educational programs will not be effective. You may note that during the high price of fuel from September 2007 to September 2008, the number of vehicles on the road reduced significantly.”
Reddy said this implied that “price elasticity of fuel demand by commuters is highly elastic. Therefore, a price policy can be used to reduce fuel demand”.
He proposed that an environment fuel surcharge should be levied to fuel purchased from all public petrol pumps.
“There will be opposition in the immediate term but gradually it will be accepted. This will have no impact on the bus companies, taxis or business. When prices shoot up, this surcharge could be used to provide cushion to the general commuters.”
Reddy also told the forum that available data showed there had been an increase in the number of seats for international and domestic flights.
However, despite the increase in transport capacity, fares in the transport sector had been increasing over the years.
“It may not have increased in real terms, but it has increased significantly. This problem will always be confronted with in developing countries. Government often addresses this by way of subsidies. This, however, is not an optimal solution. The public transport sector, particularly buses and air transport should look at ways of increasing capacity in the same run thereby reducing their unit cost.”
He said the transportation sector can be the deciding factor for the survival of tourism-based economies.
“In times of economic downturn, the tourism sector quickly turns to the transport industry for a partnership approach to reduce traveling costs and thus lure more tourists into the country. In a number of countries, with Fiji being the foremost, the transportation sector has positively responded by reducing their margins and thus reducing the transportation costs to increase tourist inflow.”
