June 26, 2017

Tags Posts tagged with "transport fares"

transport fares

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by Lee Chin Wee 

BUCKLE in, because public transport fares are likely to rise. Transport Minister Khaw Boon Wan hinted as much during his Ministry’s Committee of Supply debates last week (Mar 8). Addressing Parliament, he said that the Public Transport Council (PTC) was reviewing the current fare formula, which is due to expire later this year.

In December last year, the PTC had revised fares downward due to lower energy prices. However, Mr Khaw noted that “the PTC cannot always bring good news, sometimes they have to adjust fares upwards. And when they do, I hope commuters will be understanding.”

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Many Singaporeans, especially those in lower income brackets, will soon be feeling the pinch. A month ago, Finance Minister Heng Swee Keat announced a 30 per cent hike in water prices – the first time water prices have risen in 17 years. It also comes on the heels of increased Service & Conservancy charges in 15 PAP-managed town councils, and higher parking charges at public car parks across the island.

Of course, every fee increase must be evaluated based on its own merits. It is not enough to say that the cost of living has gone up – in the case of public transport fares, any increase should be measured against real wage growth in Singapore and the trend pattern of public transport operating costs.


Is it expensive to keep trains and buses running?

To obtain a better understanding of public transport operating costs, we studied SMRT’s annual reports from FY2011 – 2016 as a case study.  Of particular interest were the rail/light rail and bus businesses. We isolated the annual figures for operating revenue and operating profit in these areas.



Operating profit for core public transport services is not high; in fact, it is a negligible portion of SMRT’s overall profit. In 2016, SMRT recorded an operating profit of $138.5 million. Out of this sum, only $13.3 million was from the rail/light rail and bus businesses – barely 9.6 per cent of total profits. The other 90.4 per cent can be attributed to SMRT’s other business interests, such as advertising and property rental. For instance, SMRT owns Kallang Wave Mall.

Not only is operating profit already low, it is decreasing due to operating costs rising at a marginally faster rate than operating revenue. Why might this be the case? Because in recent years, SMRT has been investing in renewal works for key infrastructure, and the acquisition of operating assets. For instance, from August 2013 to December 2016, 188,000 timber sleepers were replaced with more durable concrete sleepers. To prevent further power faults, SMRT is also replacing the third rail system which supplies electricity to trains. The cost of financing these projects is not directly passed on to the consumer, as fare prices are set by the PTC.


Can Singaporeans afford a fare hike?

When fares rise, consumers end up shouldering more of the operating costs. The key question is, can Singaporeans afford it? In comparison to other countries, our public transport fares are very affordable. A 2016 study by UniSIM showed that, for a 10km train ride, Singapore’s train fare was the sixth lowest out of 35 major world cities. It costs a commuter SGD$1.33 to travel 10km on train, whereas the global average (after Purchasing Power Parity adjustment) is around SGD$2.30.

Tracking real wage growth against changes in public transport fares, it also appears that public transport fares are reasonable. Since 2011, real wage growth has broadly kept pace or surpassed increases in fares. This, however, does not account for the period of 2012 – 2013, where fare changes were temporarily suspended as the PTC reviewed its pricing structure.



Should public transport fares be going up?

Someone’s got to pay for the cost of running our trains and buses. When SMRT was still a publicly listed company, there were three parties who could do this: (1) the consumer of public transport, who pays through fares; (2) the G, who pays through taxpayer monies; and (3) the retail investor, who buys SMRT stock. Since SMRT was acquired by Temasek Holdings, we are now left with options (1) and (2).

Clearly, consumers of public transport are also taxpayers. But not all taxpayers are consumers of public transport. Hence, when the G subsidises operating costs, people who are under-consuming public transport will be cross-subsidising those who use public transport frequently. Some view this as good, because those who under-consume public transport tend to be rich anyway, and their taxpayer dollars should be used to make sure others can have cheap MRT rides. Others view this as bad, because people should contribute based on how much of a service they consume.

Another point of view is that SMRT and other transport operators should use their profits from more profitable business sectors to cross-subsidise rail and bus services. The argument here is that instead of raising fares, transport operators should be willing to take losses on its core business (that is effectively a public service) in exchange for making large profits on advertising, overseas consulting, and retail business. However, there is a limitation to this model – transport operators only have secondary interests in these other business areas, and cannot sustain such an internal cross-subsidy if operating costs continue to mount.

Regardless of what one believes, everyone would agree that high operating costs for public transport are unavoidable if we want to ensure our trains and buses become more reliable and less fault-prone. And even if public transport fares were held steady, taxpayers would still feel the pinch – either directly in the form of higher taxes, or indirectly as money that would otherwise have gone to other G services is now used to subsidise public transport.

Come this April, though, when the PTC convenes to announce changes to fares, I’ll still be hoping that my daily MRT rides get cheaper. One can dream, right?


Featured image by Sean Chong.

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Photo By Shawn Danker
The MRT passes over a bus interchange.

So the bus/train fare increases are out, based on new formulas devised by the Fare Review Committee. What would they have been under the old formula? Dunno. Should be higher since the old formula used inflation which included the cost of cars, rather than “core inflation’’. In any case, the G maintains that the new fares are at the level of 10 to 15 years ago, if anyone still remembers what they paid then.

Here are some things you might have missed while you’re trying to figure out how much you have to pay for your usual bus/train trips from April 6.

  1. The 3.2 per cent increase is less than the 6.6 per cent the transport operators asked for and what the fare formula dictates. Don’t think that your fare per se will go up by 3.2 per cent. It refers to the extra revenue that the operators want. What 3.2 per cent means: $53.5 million for the two operators.
  2. The other 3.4 per cent increase will be “rolled over’’ to next year. So does this mean it will be 3.4 per cent plus whatever the formula says for 2014? According to the PTC, the 2014 rate should be “negative’’ or -0.3 per cent, according to its “estimates’’. That means next year’s rise should be 3.1 per cent.  Remember that!
  3. Transport fares have actually got more affordable over the years. They might have gone up in dollars and cents, but not as a proportion of total spending. Really.
  4. It’s cheaper, very much cheaper, to use CARD, not cash.
  5. There’s a new Adult Monthly Travel Pass which anyone can apply for. It’s $120 a month for unlimited travel. You might want to check what your transport bill is like under the new fare structure before jumping too quickly to buy one.
  6. There’s a new $60 a month card for senior citizens. Also for unlimited travel.
  7. A whole lot of new concessions were introduced which should make polytechnic students in particular very happy because their fares get cut by half.
  8. If you are on Workfare Income Supplement, you can get a 15 per cent discount off fares. If you are disabled, you get 25 per cent off. That starts from July 6 and is funded by the G. Yes, both are new schemes. G payout: $50 million.
  9. In the meantime, this group can  apply to community centres for transport vouchers. Some 250,000 vouchers worth $7.5 million will be available. That’s funded by the Public Transport Fund which the operators contribute to. Operator payout: $11.5 million.

There’s a contradiction between the ST report and what the PTC says. ST said that the $11.5 million will come from the $53.5 million extra revenue the operators will get with the fare increase. But the PTC said in its press statement that the “gain in revenue does not include money to be set aside by the operators for the Public Transport Fund’’.  Guess the operators will have to get the money from elsewhere…

The interesting thing about this exercise is that while the operators will get a $53.5 million revenue rise; the G is subsidising some commuters to the tune of $50million. This special group is known in transport jargon speak as LWW or low wage workers and PWD or person with disabilities. Yucks. Ugly acronyms…

That’s real good of the G. It’s turning left…

But I’m hoping a transport economist weighs in. What does this mean? That the G is actually footing most of the total fare rise through its subsidies for the two groups or what?  So hard to figure out or maybe I am just stupid. I would be more than happy to be corrected and labelled stupid.

Anyway, for the commuter, you will know what all the numbers mean to your pocket on April 6.


This article was first published at berthahenson.wordpress.com.

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Photo By Shawn Danker
The MRT passes over a bus interchange.

First, it was May; then, June. Now, who knows when?

The submission of a highly anticipated report reviewing public transport fares has been postponed yet again. This time, the announcement was made by the review committee’s head Richard Magnus in a blog post yesterday.

All the major papers carried the news this morning – according to Mr Magnus, the committee will need “additional months” before finalising the report.

He said it wants more time to “tie the loose questions” and gather “quantitative feedback” – whatever that means – so that its report can be “unbiased and objective”.

The committee will have to look at “hard issues” to make “difficult trade-offs” – in sum, it has to “carefully balance the social aspects and economic considerations of our public transport system”.

Responding to Mr Magnus’ announcement on his Facebook page, Transport Minister Lui Tuck Yew said he was okay with the delay.

He said the outcome of the report would affect many people, adding: “I have every expectation that it will be a thorough and thoughtful report.”

Now, it’s no secret that the 14-member panel has been working for months to come up with a fare system that extends concessionary rates to a wider pool of commuters – including not just the elderly, but also the disabled, low-income, and polytechnic students. Other proposals it’s considering include cheaper adult season monthly passes that cap spending at $120 or less.

It’s a meaningful goal – but one that public transport operators are unlikely to support without some resistance. No surprise we haven’t heard anything from them.

The big questions now will be about detail: Exactly when’s the report really going to come out, and what’s going to be in it? How much will everyone have to pay to ride the bus or MRT?

On the first question, ST said that the committee may take another two to three months to submit the report – that puts the deadline at the end of August.

As for what’s going to be in the report, ZB came closest to getting an insider look.

The Chinese-language paper said that a newly revised adult monthly pass aimed at the general public is expected to be introduced from Jan 1 next year.

It’s unclear how much commuters will have to pay for this pass, however –  according to ZB, most commuters today spend an average of $60 to $70 a month on travelling costs. Only about 5 per cent spend $120 or more – but the only available monthly pass now is priced at $190.

So, is the review committee’s target of $120 or less too much or too little? Well, guess that depends on who you ask at the conference table.

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Photo By Shawn Danker
The MRT passes over a bus interchange.

by Yen Feng

The highly anticipated public transport fare review report due at the end of this month may be released only next month – the second time the report has been delayed.

According to an exclusive report in Zaobao today, the Fare Review Mechanism Committee, the group tasked last year by the Transport Ministry to review MRT and bus fares, has asked for more time to confirm suggestions that will likely widen the eligibility criteria for discount fares.

Groups that will be eligible for fare subsidies believed to be included in the report are: the elderly, needy, physically disabled, polytechnic students, and young children above 0.9m – the current cut-off height for kids to ride free.

The report was initially scheduled to be presented early this year, but in February, Transport Minister Lui Tuck Yew delayed the report after asking the committee to include in its review a framework that explores the affordability of fares across the various commuter groups.

The 13-men committee is led by Mr Richard Magnus, chairman of the Casino Regulatory Authority and member of the Public Transport Council.

Asked about the delay, a committee member told ZB: “The review is still ongoing, we will make public the recommendations at the appropriate time.” He did not elaborate.

Mr Cedric Foo, chairman of the Government Parliamentary Committee for Transport, said that it was more important to ensure that the report would be a comprehensive one, rather than rushing to put it out, according to ZB.

Though he did not specify the reasons for the delay, he said the issue of concession fares was “a problem that required deep and mindful research and consideration – including who should be paying the bill”.