THE Ministry of Transport (MOT) has weighed in on expected fare hikes later this year, saying a process is already in place to ensure that transport operators do not maximise profits at commuters' expense.
By Kor Kian Beng
Transport Minister Lui Tuck Yew also rebutted a call by the opposition Workers' Party (WP) to nationalise public transport.
In a Facebook post yesterday evening, he said such a move would likely result in taxpayers and commuters paying more for poorer service.
Transport operators SBS Transit and SMRT Corp announced on Monday that they are seeking a fare increase.
That has sparked noisy debate, with some people asking why the companies are allowed to do so even though they are still making profits.
This year, the two operators have applied for an increase that will work out to a 2.8 per cent rise in total fares collected. That is the maximum allowed.
The Public Transport Council (PTC) has to approve any hike in fares. It bases its decision on a fare adjustment formula that factors in inflation, wage adjustments and productivity. The PTC also looks at the operators' profit levels.
The current formula is valid until next year. MOT yesterday said the PTC would review the formula for subsequent years.
Mr Cedric Foo, who chairs the Government Parliamentary Committee for Transport, thinks the review should start this year, to prepare for its implementation next year. He noted that the current formula has been in place for six years.
'We do have sufficient experience with it to evaluate its efficacy in meeting our public transport objectives,' he added, and promised to consult the public and opposition parties as part of the review process.
In their responses, Mr Lui and MOT sought to explain why it was better to have commercial operators provide public transport services, rather than a national corporation as proposed by the WP.
The profit motive spurs commercial operators to be efficient and improve productivity, Mr Lui said. By contrast, a national corporation run on a cost-recovery basis would have little incentive to keep costs down, he said.
MOT said the experience of other cities shows that private operators are more efficient. That is why cities like Melbourne, Tokyo, Stockholm and Seoul either have or are moving towards commercial enterprises providing public transport services, it said in its statement.
It also urged the public not to view the two local transport operators' profits for each year in isolation. The operators need these profits for future investments in new buses and trains, it added.
In his post, Mr Lui also noted that public transport here is 'very heavily subsidised'.
The Government has invested $20 billion in the existing rail infrastructure and will invest another $60 billion in new rail lines by the end of the decade. However, it does not subsidise operational costs.
'What is important is to ensure that commuters' interests are safeguarded even as we have commercial enterprises run the public transport services,' Mr Lui said.
National University of Singapore transport researcher Lee Der Horng said the fare adjustment formula should be reviewed yearly as global and local economic conditions 'may change faster' than expected. He also suggested that the formula factor in service quality, to ensure that fare hikes are tied to better service.
Transport economist Michael Li of the Nanyang Business School suggested a fund to hedge against fluctuations in fuel prices. Transport operators often cite fuel price increases as one of the reasons to hike public transport fares.
Such a fund should be managed by the Government or an independent body, Dr Li said: 'That way, the operators won't have an excuse to raise fares when oil prices are up but not cut fares when oil prices are down, which commuters perceive to be unfair.'
