Smaller hikes this year, if any
Cap is 1.7%, lower than 2.4% last year, and any
rise will take effect in October
By Christopher Tan
SENIOR CORRESPONDENT
IF BUS and train fares go up this year, any increase will be capped
at 1.7 per cent, lower than the 2.4 per cent hike last year.
Last year's 2.4 per cent cap resulted in bus and train fares rising
in July by one to three cents per ride for ez-link card users, and
10 cents for commuters who use cash or buy single-trip tickets on
trains.
Therefore, this year's increase is likely to result in smaller
rises all round.
The Public Transport Council said this year's ceiling is based on a
mathematical formula introduced last year that is more reflective
of economic conditions.
From last year, fare adjustments are supposed to be annual affairs,
as the authorities argued that small but regular changes were
preferred to bigger jumps every few years.
When contacted, an SBS Transit spokesman said the company will
probably apply for a rise when the time comes, while SMRT said it
will decide only when the deadline draws nearer.
This year's application deadline was pushed to August, from this
month, because the council needed more time to implement broad
changes to the Public Transport Council Act.
These include a new licensing regime for bus operators, an audit
system for bus operator service standards and a penalty system for
fare evaders.
As such, any fare increase will take effect in October, instead of
July.
With oil prices crossing US$70 (S$110) this year, it looks certain
that the two transport operators will ask for a fare hike.
In justifying its application last year, SBS Transit cited a 40 per
cent rise in oil prices to US$50 a barrel in the first quarter of
2005.
The company said then, even if it was granted the maximum fare
increase allowed, the additional revenue of $14 million would not
cover the estimated $17 million increase in fuel and energy costs
for 2004, and a further $15 million to $18 million for 2005.
Council chairman Gerard Ee said the council will still have to look
at the operators' books and 'ask them for justification' for any
increase. It will also examine their profitability.
ComfortDelGro, SBS Transit's parent group, posted net earnings of
about $200 million last year, while SMRT made about $100
million.
If the application is justifiable, 'we will then decide with them
how the actual increases are to be applied', Mr Ee said, noting
that last year's rise was not across the board.
In calculating the new fares, the council will also factor in data
on average changes in the Consumer Price Index and wages.
Unlike the old formula which pegged fares only to the Consumer
Price Index, the new formula allows fares to fall during an
economic downturn.
With all factors considered, Mr Ee said the council and the Land
Transport Authority will then run the numbers through a computer
program to see if the overall increase is within the prescribed
cap.
Asked what he thought about the recent call by the Workers' Party
for the council to be abolished and transport companies to be
nationalised, Mr Ee said nationalised entities need not be more
efficient than private corporations.
In any case, 'who's going to set the fares?' he asked.
When it was pointed out that low-income families have seen
commuting costs rise more than overall household expenditure, Mr Ee
said it is more effective to target the poor with measures such as
the $4 million transport fund set up last year to help 80,000
families.
'If we structure fares that are affordable to the poorest group, we
will subsidise the other commuters,' he said. 'And that may not be
fair to the transport operators, whose shareholders are not
necessarily wealthy.'
Social workers reckon a fare rise will again hit low-income
families hard.
'We regularly come across people who find it hard to pay bus fares.
So they prefer not to work too far from their home,' said Ms Koh
Wah Khoon, director of the Singapore Children's Society Family
Service Centre in Yishun.
'There are some who walk to our centre, just to save on bus
fare.'
Mr Ee, who is president of the National Council of Social Service,
said if commuters want lower fares, they may have to manage their
expectations - meaning they will have to make do with lower
standards of service.
'We have a fairly reasonable system compared with many other
countries,' he added.
[email protected]
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Fare formula
THE year-old fare adjustment formula is expressed mathematically as
0.5 CPI + 0.5 WI - 0.3%, where CPI is the change in the Consumer
Price Index (or inflation), WI is the change in average wages and
the third element is the productivity gain of transport companies,
fixed at 0.3 per cent until the next review in 2008.
This year's 1.7 per cent cap is derived thus: 0.5 (0.5% CPI
increase from 2004 to 2005) + 0.5 (3.5% wage increase) - 0.3%. Last
year's 2.4 per cent rise was based on: 0.5 (1.7%) + 0.5 (3.6%) -
0.3%.
