Govt to fork out additional S$200m to 'shield commuters' from brunt of public transport fare increases

SINGAPORE — Amid concerns over the rising cost of living, the Government will fork out an additional S$200 million to defer the bulk of public transport fare increases to next year's review, the Ministry of Transport (MOT) said on Wednesday (Oct 12).

The S$200 million is in addition to the S$2 billion annual subsidy already provided by the Government to run bus and train services. 

The Public Transport Council (PTC) has approved a 2.9 per cent increase for public transport fares, which translates to a four to five cents hike for adults per trip from Dec 26.

This is much lower than the 13.5 per cent adjustment allowed under the fare formula, and means 10.6 percentage points will be rolled over to next year's review.

PTC said that the rationale for the calibrated adjustment is to balance between the rising costs incurred by operators, while at the same time taking into consideration concerns by the public over rising costs of living. 

“The S$200 million support covers the carried-over quantum of 10.6 percentage points and shields commuters from the brunt of the fare increases, given the cost of living concerns,” MOT said in a press release on Wednesday.

When TODAY sought confirmation by MOT on whether this extra subsidy was a first, it replied: “The Government also provided an additional subsidy to support the carried-over quantum of 4.4 per cent from the fare review exercise in 2020. As the carried-over quantum was implemented in the fare review exercise of 2021, there was no additional subsidy.”

MOT added that to help low-income households cope with the rise in fares, 600,000 public transport vouchers of S$30 each will be given to lower-income and lower-middle-income households.

The vouchers, which can be used to top up fare cards or buy monthly passes, will be made available for families with household income per capita of not more than S$1,600.

Vouchers were similarly given out during previous fare increases.

In a joint release with the People's Association, MOT said that the vouchers will be disbursed in two stages this year.

In the first stage, households that had received transport vouchers during the 2021 exercise and continue to meet the income eligibility criteria will receive a notification letter via post by the end of this year. They do not need to make any application.

Under the second stage, which will start from early next year, households that meet the eligibility criteria but did not receive a voucher in the first stage can apply for them online or in person at community centres.

Details of this application process will be made known at a later date. 

In addition, MOT said that the increase for concession card fares for lower-wage workers and persons with disabilities will be capped at one cent.

Other concession groups that will see a lower fare increase than adult commuters are senior citizens and students. The prices for monthly concession passes will remain unchanged.

“As a result, half of Singaporeans will see a small fare increase, with some experiencing no fare increase,” the ministry said.

HOW LONG WILL ADDED SUBSIDIES STAY?

When asked about the sustainability of the Government’s move to provide more subsidies, transport analysts noted that the Government has already been subsidising public transport operations for a long time, because these costs cannot be sustained by commuters’ fare payments alone.

The question then, is a matter of what is the right level of subsidy?

Looking at the present economic conditions, transport economist Walter Theseira from the Singapore University of Social Sciences projected that “it will take quite some time” before a bigger part of the costs can be moved “to the commuter side of the equation”.

This is because “economic turmoil we've been going through for the last nine months” will only be taken into account in next year’s fare review.

“We will probably still see some potential fare-formula-driven hike for next year," the associate professor said.

"And if commuters are not doing so well economically, then this will likely mean that the Government will have to continue some kind of subsidy."

Agreeing, transport analyst Terence Fan from the Singapore Management University said that even this year’s fare review has not reflected the “fullest extent” of the rising costs, pointing to the roll over of the remaining 10.6 per cent hike being deferred to future reviews.

The Network Capacity Factor — a parameter introduced into the fare formula in 2018 to reflect changes in cost due to enhancements in public transport capacity relative to commuter demand — has also been disregarded in this year’s review calculation, despite the ongoing and upcoming rail network expansions, for example.

“Going forward, there's a lot of potential for upside adjustment, but whether or not (the Government) will do that in one go, or whether it will use a moderated approach, little by little, I think that remains to be seen,” Asst Prof Fan said.

Though he observed that so far, the approach taken seems to be slow and graduated. 

When then would the Government potentially start to cut back on extra subsidies?

Asst Prof Fan said that one factor would be the ridership levels, which now stand at around 80 per cent of pre-Covid levels.

“It is hopeful that in time, we will gradually reach the level where we were at and probably even exceed that.

“(Then) fare revenues will come in higher and therefore, subsidies will be lowered.”

Assoc Prof Theseira reckoned that a “good opportunity” to pass a portion of the cost back to commuters is when there is a prolonged period of deflation with declining costs.

“Because when the fare formula says fares can go down, instead of letting fares fall, you can simply absorb the carry-over from the previous fare hike and keep fares stable," he said, adding that it would be "less painful" that way than doing it when costs are rising.