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Public transport fares could increase by up to 4.3% next year as new formula kicks in

SINGAPORE — Bus and train fares could cost up to 4.3 per cent more — or not more than 10 cents per journey — next year, the Public Transport Council (PTC) said on Monday (Sept 3) as it kicked off the latest fare review exercise.

After three consecutive years of decreases, public transport fares could increase by up to 4.3% next year as the new formula kicks in.

After three consecutive years of decreases, public transport fares could increase by up to 4.3% next year as the new formula kicks in.

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SINGAPORE — Bus and train fares could cost up to 4.3 per cent more — or not more than 10 cents per journey — next year, the Public Transport Council (PTC) said on Monday (Sept 3) as it kicked off the latest fare review exercise.

After three consecutive years of public transport fare decreases driven mainly by falling energy prices, the PTC said the rise under a new fare formula is largely due to a sharp rebound in energy prices, wage growth for bus captains and rail employees, as well as the highest rate of inflation in three years.

A new component called Network Capacity Factor (NCF) introduced this year will track structural changes to operating costs, as a result of the changes in capacity and usage attributed to the growing rail network.

As capacity growth in the public transport network outstripped ridership growth measured by the NCF, 3 per cent was added to the overall fare review for this year.

Besides the NCF, the revised fare formula — applicable from 2018 to 2022 — takes into account new weightages for different components under the old formula, namely the core Consumer Price Index (cCPI), the Wage Index and the Energy Index (cost changes in electricity and diesel) over the preceding year.

For example, the cCPI, which tracks inflation, increased in weightage from 0.4 cCPI to 0.5 cCPI, while the Energy Index decreased in weightage from 20 to 10 per cent.

This year's 4.3 per cent fare adjustment quantum was cushioned by the carry-over quantum of -3.2 per cent from last year's fare review exercise.

The fare formula review is typically done by the PTC once every five years, and it was last revised in 2013.

Associate Professor Vincent Chua of the University of Social Sciences (SUSS), who is also a PTC council member, wrote on the council's blog that 2018's allowance for fare adjustments, if implemented in full and using the last fare increase in 2014 as a comparison, "should not result in fares increasing by more than 10 cents per journey". Four years ago, fares increased by 2.8 per cent, which was a two- to five-cent rise in adult fares per journey.  

FARES DOWN FOR 3 YEARS

Public transport fares have gone down for three consecutive years, with reductions totalling 8.3 per cent, a trend Assoc Prof Chua called "unprecedented", and a "good example of how the PTC has been disciplined in implementing the fare formula".

He said: "In the 2015 fare exercise, bus and train fares were reduced by up to 4 cents. In the 2016 exercise, we saw fare reductions of up to 27 cents through the simplification of our fare structure, and in the most recent round of fare adjustments, weekday rail trips beginning before 7.45am saw a discount of up to 50 cents.

"These changes are significant."

The PTC closely tracks the affordability of public transport fares of Singaporeans who belong to the income group representing the average commuter, and those from the income group representing the lower-income commuter.

While the Government has always fully borne the cost of building public transport civil infrastructure, Assoc Prof Chua noted that it is not sustainable for the Government to continue bearing all the recurrent cost increases.

The key is to strike a good balance between affordability and sustainability, he added.

WHAT THE EXPERTS SAY

Economist Walter Theseira from SUSS said the 4.3 per cent maximum allowable fare adjustment quantum was not too surprising as fares had been heading south for the past few years.

The reduction was not sustainable, he noted.

"If you look at the trend, it is pretty clear that you cannot depend on low energy prices... And indeed energy prices went up," Dr Theseira said.

"It is the same for wages because Singaporeans want higher wages, and wages will increase especially when you want to increase the local core for the transport industry."

Transport researcher Lee Der-Horng from the National University of Singapore noted that the drop in weightage of the Energy Index component had helped offset the maximum allowable fare adjustment quantum.

Dr Lee said: "Although the global energy price has stabilised, the contribution from energy could be even higher if not because of the 10 per cent weightage assigned to Energy Index. In a way, we can say that the fare formula has absorbed the impact caused by increased energy price."

He added that the introduction of the new NCF component to this year's fare formula should not concern commuters, as the NCF weightage is linked to service quality.

"If the level of service comes down in terms of congestion levels (in the trains, for example), it will lead to a downward fare adjustment through NCF," Dr Lee explained.

"The NCF will stimulate the operators in improving their respective service and capacity provision to enable their pursuit of financially sustainable operations."

Agreeing, Dr Theseira said that without such a component, there would be no link between the fares and the quality of service.

He added: "(The NFC) is no different from everything else. If you want more ingredients in your food, there is some cost in providing this service.

"(Commuters) can ask for higher quality service, but you can be asked to pay more for that. They can decide if it is worth it."

Dr Theseira said Singapore had had the "luxury of being a fairly rich country and strong tax base", resulting in being able to provide more without passing costs onto commuters.

Noting that many other countries run deficits and are unable to provide subsidies indefinitely, he added: "The real challenge is how do we get value for money and get people to support paying public transport fares."

Any final changes in public fare prices will be announced in the last quarter of this year, after the Oct 1 deadline for public transport operators to submit their fare applications, the PTC said.

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