I THANK Mr Tan Shao Yi for his letter last Thursday ("Free
public transport of bottom-line mentality").
Having commercial operators provide public transport services is
not in conflict with safeguarding public interests. Our approach is
to ensure that public transport operators (PTOs) are motivated to
operate as efficiently as possible, but within a strong regulatory
framework that safeguards the interests of the commuting
public.
To ensure that the pursuit of profit is not at the expense of
service quality, PTOs have to meet Quality of Service standards for
buses and Operating Performance Standards for trains. These
standards are reviewed regularly. Basic bus operators are also
subject to a Universal Service Obligation. This requires them to
provide a basic service when there is a minimum level of demand,
even if the route is unprofitable.
In addition, the Public Transport Council regulates public
transport fares through a fare cap formula, such that the PTOs
cannot raise fares and pass on their costs as they wish. This fare
mechanism allows PTOs to operate like commercial enterprises and to
strive for profits by being more productive and cost-effective in
their operations, but at the same time, also requires the PTOs to
share their productivity and efficiency gains with commuters in the
form of lower fare caps.
A nationalised operator that does not operate on a commercial
basis would have less incentive to keep costs down, especially if
fares are allowed to be charged on a cost-plus basis. Over time,
this will lead to higher costs for the same level of service. This
is why many cities around the world, like Hong Kong, Sydney,
Melbourne, Tokyo, Stockholm and Seoul, have commercial enterprises
and not nationalised operators provide public transport
services.
Helen Lim (Ms)
Deputy Director, Media Relations
Land Transport Authority