Huge increase in expenditure, will Budapest's public transport collapse?

The Hungarian government is subsidising personal car use with a huge fuel price cap. However, public transport companies are struggling to cope with the soaring energy costs. Taxi drivers can fill up at a reduced price, but hauliers and company cars cannot. Could rising costs bring Budapest’s public transport to a standstill?

Controversial regulation

Chancellor Gergely Gulyás said that it would be nice if everyone in Hungary could get free fuel, but as we were an energy-poor country, this was not possible. Most recently, the Hungarian government has further reduced the number of people who can fill up at reduced prices.

Currently, the difference between the official price and the market price is HUF 200 (EUR 0.51) for petrol. For gas oil, it is HUF 260 (EUR 0.66). For a 40-litre tank, there is a state subsidy of between 8,000 (EUR 20.32) and HUF 10,000 (EUR 25.41). There was a time when it was even more. In June, the market price of petrol was around HUF 800 (EUR 2.03), while diesel was even more. As a result, the state expenditure was even higher.

Moreover, it is done without taking into account any social or life situation considerations when supporting the motoring public. A well-off single person living in the centre of Budapest receives the same amount of subsidy per litre of fuel as a single person with a large family living in the countryside, hvg.hu reports.

In general, the more fuel you buy, the more subsidies you receive. As a result, fuel consumption is breaking records. According to the Hungarian Mineral Oil Association, “in the first half of the year, 748 million litres of regular motor gasoline were consumed, 47 percent more than in the first half of 2021.”

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Budapest transport in trouble

However, public transport vehicles are refuelling at market prices. Moreover, public transport is being hit not only by the increased fuel prices, but also by rising electricity prices. A large proportion of vehicles, including trolleybuses, trams, metro trains and some trains, are electrically powered. The severity of the situation is clearly illustrated by the Budapest Transport Company (BKV). BKV’s costs doubled in the first half of the year compared to a year earlier.

BKV buses only refuel at filling stations on the premises. As priority users, they always buy fuel at a special price. Volán’s fuel consumption is several times that of BKV. MÁV Start has also increased its costs by around 30-40 percent.

No government support

BKV has doubled its loss of HUF 6.6 billion (EUR 15.2 million) in 2020 to HUF 12.3 billion (EUR 30.4 million) in 2021, and this could double again in 2022, with a HUF 26 billion (EUR 66 million) deficit planned in the business plan.

The government gives HUF 12 billion (EUR 30 million) a year from the budget to subsidise all public transport in the capital – an amount that has remained unchanged for years and is now slowly covering the cost of BKV’s fuel.

In addition, the government gives some compensation for those travelling at reduced fares. However, this has already been underestimated by former Mayor István Tarlós. The municipality of the capital has no plans to stop services for the time being, as people need public transport, telex.hu writes.

What is the solution?

According to experts, there are three possible ways out. One is to reduce costs, which means cutting or reducing the number of flights. The solution could be to raise fares, but this would be an additional burden on the public. The third solution is targeted government support, but this is the least likely at present. It is clear that at current levels of expenditure, transport in Budapest is not sustainable in the long term.