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Bus, train fare changes to be 'less volatile' under revised formula for calculating fares: Public Transport Council

SINGAPORE — Bus and train fare changes will be less volatile while fares will remain affordable under two changes to the formula used to calculate them, the Public Transport Council (PTC) said on Tuesday (April 25).

A formula used to calculate bus and MRT train fares in Singapore has been adjusted.
A formula used to calculate bus and MRT train fares in Singapore has been adjusted.
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  • The Public Transport Council proposed a new formula to calculate public transport fares
  • The formula, which has been accepted by the Ministry of Transport, will take effect from the 2023 Fare Review Exercise and be valid until 2027
  • The new formula is expected to make fare changes less volatile and ensure they remain affordable for commuters
  • Transport analysts said the changes will help moderate any increase in fares, but external conditions such as geopolitical tensions could affect energy prices

SINGAPORE — Bus and train fare changes will be less volatile while fares will remain affordable under two changes to the formula used to calculate them, the Public Transport Council (PTC) said on Tuesday (April 25).

The council's recommendations have been accepted by the Ministry of Transport, which means that the new fare formula will take effect from the 2023 Fare Review Exercise, expected in the second half of this year.

The formula will be used until 2027. 

Transport analysts told TODAY that the changes will help moderate any increase in fares in the light of inflation, manpower expenses and unstable energy prices. 

The recommendations came after the council's review of the public transport fare adjustment formula and mechanism, called for by Transport Minister S Iswaran in August last year. The last review was held in 2018.

As part of the latest review, PTC formed a 10-member workgroup that looked into three areas:

  • The inflationary environment
  • Uncertainty in ridership patterns and recovery post-pandemic
  • Continuous enhancements to the public transport system with rising government subsidies

Among its recommendations, the workgroup proposed replacing the components of the formula known as “productivity extraction” and “network capacity factor” with “capacity adjustment factor” and “productivity contribution”. 

Here is a look at what this means, and how it will affect the public transport fare structure.


At present, the fare formula is pegged to changes in the core consumer price index (cCPI), which relates to the overall cost of living, the wage index (WI) and the energy index (EI), which refers to cost changes in electricity and diesel.

It also factors in productivity extraction (PE), which is meant to allow commuters to benefit from a transport operator's productivity gain by deducting it from the fare formula output.

From 2018 to 2022, this was set at 0.1 per cent. 

In addition, the fare formula also includes the network capacity factor (NCF).

This refers to the recurrent operating costs due to capacity adjustments, such as running more trains and buses over longer distances to provide less crowded and more convenient public transport rides.

In the 2018-2022 fare formula, the NCF value ranged from 1.6 per cent to 3.9 per cent before it was suspended in February 2020, as the sharp drop in ridership due to Covid-19 would have caused a significant spike in the value of NCF.


The formula now is: 0.5 cCPI + 0.4 WI + 0.1 EI – PE + NCF.

The new formula will see no changes to the three indices, as data on such costs showed that the relative weights for these cost components have remained similar.

However, two new components will replace the NCF and PE.

  • The NCF will be replaced by a fixed "capacity adjustment factor" (C) set at 1.1 per cent each year for the next five years, taking into account actual and planned public transport expansion from 2020 to 2026
  • The PE will be replaced by a productivity contribution (PC) fixed at minus 0.1 per cent each year for the next five years, which the PTC said will "set the expectation for continuous productivity improvements"

With these proposed changes, the new formula will be: 0.5 cCPI + 0.4 WI + 0.1 EI – PC + C.


On the NCF, the workgroup said that it was introduced as a proxy for cost changes due to adjustments to the capacity of the public transport system relative to the level of commuter demand.

However, it was not designed to track sharp fluctuations in demand and supply during exceptional periods such as the Covid–19 pandemic.

For example, due to the sharp drop in ridership in 2020, the NCF in the 2021 Fare Review Exercise would have been 50 per cent, which would have meant that fares could have similarly increased by 50 per cent.

“This was not the intended use of the NCF, as the sharp drop in ridership was not due to organic changes in ridership patterns,” the workgroup said.

Even when ridership recovers to pre-Covid levels, the workgroup said that the NCF, if it were kept, would have continued to fluctuate, increasing in years when new rail lines open and turning negative when ridership catches up.

While it was important to capture capacity expansion as a major factor affecting cost changes, the workgroup also felt that there was a “clear need” to address the variability of NCF, which in turn can cause variability in fares.

Its solution was to replace the NCF with the capacity adjustment factor (C), which will be based on the expansion of the public transport network from 2020 to 2026.

Much of this is associated with better connectivity and shorter journey times resulting from the opening of the Thomson-East Coast Line, PTC said.

Fixing C at 1.1 per cent during the fare formula’s five-year validity period will avoid the year–to–year changes that affected NCF, it added.


On why it recommended replacing PE, the workgroup said that productivity gains by public transport operators over the last five years were attained mainly through the provision of government support.

Therefore, taking PE into consideration did not reflect the operators’ true productivity gains.

However, the workgroup agreed that it is important for public transport operators to improve cost–efficiency and productivity.

Therefore, setting PC at 0.1 per cent for the next five years would “signal to the public transport operators” that they should strive for continuous productivity improvements.

Taking 0.1 per cent from the fare formula to reflect this factor was a way of ensuring that the public transport operators contributed to the goal of fare affordability, PTC said.

This means that operators will need to strive to improve productivity to offset the 0.1 per cent fare reduction.

Transport analyst Walter Theseira told TODAY that in practice, PE and productivity contribution are "pretty much identical". 

The only difference is that the extraction formula was supposed to be based on the actual productivity gains of the operators. 

The new version is based on a hypothetical gain.

Associate Professor Theseira, a transport economist from the Singapore University of Social Sciences (SUSS), added: "If it was based on the actual productivity experience, it will not be reducing fares.

"The productivity experience of transport operators' over the last couple of years has been pretty much zero." 


Aside from the proposal to change the fare formula, the workgroup also recommended retaining the Deferred Fare Adjustment mechanism.

This would allow PTC to take into consideration the prevailing social and economic conditions and defer fare adjustment quantum, in part or in full, to subsequent fare review exercises.

PTC said that this helps to moderate the impact of fare increases on affordability in extenuating circumstances, such as the Covid-19 pandemic, or due to large spikes in energy prices as seen in last year’s fare review exercise.

The council added that it is mindful that deferred fare increases require “additional government subsidies to be provided” and so, should be exercised judiciously.


In response to TODAY’s queries, PTC said that the fare adjustment formula and mechanism are meant to “track actual changes in costs of running public transport services, while keeping fares affordable for commuters”.

The review was meant to ensure that the formula remains a good reflection of cost.

“On fare changes, this will be reviewed during the annual fare revision exercise, taking into account the prevailing economic and social conditions,” it said.

Both Assoc Prof Theseira from SUSS and Associate Professor Raymond Ong, a fellow transport economist, said that whether the fare prices will increase in future depends on a variety of factors.

Assoc Prof Ong, from the department of civil and environmental engineering at the National University of Singapore, said that the proposed changes have allowed PTC to control whatever can be controlled.

Having a fixed rate for the capacity adjustment factor and the productivity contribution for the next five years, as opposed to a floating rate, will prevent any fluctuation in the numbers that make up the fare adjustment formula, he added. 

"So in other words, the public now knows for certainty for the next five years, that's a net 1 per cent increase, at a minimum, if all else remains zero." 

He was referring to the net effect of the 1.1 per cent capacity adjustment factor less the 0.1 per cent productivity contribution, while assuming the core consumer price index, the wage index and the energy index remained stable.

He added that the public needs to be aware that ongoing geopolitical tensions, such as the Russia-Ukraine war, are affecting the stability of energy prices

Assoc Prof Theseira said that whether there will be a fare hike by the end of the year will "depend on politics", which may see the Government extending operating subsidies through the Deferred Fare Adjustment mechanism. 

However, he also said that this is not something that the Government will be able to do indefinitely.

Related topics

Public Transport Council transport fare

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