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Public transport fares could be cut by 5.4% next year

SINGAPORE — Public transport fares could drop by as much as 5.4 per cent, the Public Transport Council (PTC) signalled on Wednesday (Aug 30) as it kicked off this year’s fare review exercise.

SINGAPORE — Public transport fares could drop by as much as 5.4 per cent, the Public Transport Council (PTC) signalled on Wednesday (Aug 30) as it kicked off this year’s fare review exercise.

The fares regulator will announce its decision in the last quarter of the year. 

Given that this is the last time the existing fare formula will be used, transport experts reckon it is likely a fraction of the reduction from this exercise will be carried over to the next round, to offset a potential increase when the PTC switches to a new formula.

The PTC began reviewing the formula in April, and PTC chairman Richard Magnus had reiterated Transport Minister Khaw Boon Wan’s signal that fares would have to rise. 

Mr Magnus had said that service improvements come at a cost and there would need to be “equitable cost-sharing among commuters, taxpayers and public transport operators”. 

The new formula will be used for the 2018 fare review exercise, and the PTC expects to complete the formula review by the first quarter of next year.

Based on the current formula, fares should be reduced by 3.9 per cent in this year’s fare review exercise, said the PTC in a statement on Wednesday.

Together with the carried-over reduction of 1.5 per cent from the 2016 review, the fare adjustment quantum to be considered for this year’s exercise is a decrease of 5.4 per cent.

The current formula, introduced in 2013, is pegged to changes in the Core Consumer Price Index, the Wage Index and the Energy Index (cost changes in electricity and diesel) over the preceding year.

Singapore University of Social Sciences (SUSS) urban transport expert Park Byung Joon said: “It is unlikely that (the PTC) will implement the 5.4 per cent reduction in full. They will carry a little bit over because the new formula will be in place next year, and they will want some kind of buffer to play around (with).”

Singapore’s public transport fares are “nearly the lowest in the region” and “may not stay low for long”, noted National University of Singapore transport researcher Lee Der Horng.

“The main consideration is probably more on whether PTC will have the full adjustment or reserve a portion to carry over to next year – knowing that the formula itself is to be adjusted and there have been discussions that the government expenditure in public transport has gone up quite significantly in recent years and the trend will continue in the future,” he said.

The PTC said it will “strike a balance between keeping our public transport fares affordable and ensuring the long-term viability of the public transport system”.

Train operators SMRT Trains and SBS Transit may submit their fare applications by Sept 29 to the PTC for consideration.

Like last year, bus operators will not be required to apply to the PTC for approval of fares as the industry transits to the bus contracting model – where the Government pays bus operators fees to operate bus services and retains the fare revenue.

Fares in last year’s exercise were reduced by 5.7 per cent – the maximum quantum allowed under the formula – and transport fares were cut by 4.2 per cent from Dec 30 last year, or up to 27 cents per trip. The remaining 1.5 per cent reduction was carried over to this round.

Analysts have previously noted that the future fare formula might be more complex to work out, given changes to the public transport framework.

Last year, the Land Transport Authority bought over SMRT’s operating assets — such as trains and the power supply and signalling systems -- for the North-South and East-West lines, the Circle Line and the

Bukit Panjang Light Rail Transit, bringing them under the New Rail Financing Framework last October.

The deal freed SMRT from hefty capital expenditure and large fare revenue risks, but it will have to meet a new set of maintenance performance standards spelt out by the regulator.

On future rounds of fare adjustments, Dr Park said: “Fare reduction had always been a good news for the commuter and bad news for the public transport operators, and vice versa. It was a zero-sum game in a way. The PTC’s job was to find a balance between the two. Now, (if) everything is under the government, it is not commuter versus the operators any longer. It is actually commuters versus taxpayers.”

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