Value of Services Provided by Public Transport Operators in Return for Grants Given during COVID-19 Pandemic and Sustainability of Model

Mr Saktiandi Supaat asked the Minister for Transport in light of the reduced public transport revenues in this COVID-19 pandemic times and rising expenditure costs (a) whether the Government is satisfied with the value of services in return for grants given out in the current model; and (b) whether the Ministry is looking into restructuring our public transport system, possibly exploring the merger of public transport operators to improve coordination and sustainability under current circumstances.

For the rail industry, LTA has been working closely with rail operators since 2011 to enhance rail reliability, which has exceeded our target of one million mean train kilometres between failures (MKBF) since 2019. These efforts have however come at a significant cost, especially as rail operating assets such as the signalling and power systems continue to age. As the fares paid by commuters are insufficient to cover operating costs, public transport operators have been registering losses for their rail operations even pre-COVID.

However, this is not sustainable. Public transport should be financially sustainable to ensure operators can continue to provide reliable train services to commuters. To support the operators in achieving and sustaining high reliability levels, we implemented an incentive system, termed the Rail Reliability Incentive, from 2020 to 2023. To qualify for the incentive, rail operators are held to a set of targets on operational performance and safety, including a minimum MKBF of 500,000 train kilometres. Operators obtain the full grant quantum if they achieve one million MKBF or better. As a result, we have seen the operators sustain their performance of above one million MKBF since 2019.

For the bus industry, the Bus Contracting Model (BCM) was introduced in 2016 to make bus services more responsive to commuter needs and to inject more competition into the industry. We do not provide targeted grants under BCM, but instead pay operators service fees to operate the bus services at required service levels. We have also introduced the Bus Service Reliability Framework to incentivise bus operators to improve the timeliness of bus arrivals. Operators who meet the targets receive incentive payments, while operators who fail to do so will see their fees reduced.

Since the start of the COVID-19 outbreak, public transport ridership has fallen, and fare revenues have decreased sharply. Nevertheless, the operators have largely preserved service capacity and headways. In addition, public transport operators have incurred additional costs to put in place enhanced measures to keep commuters safe.

During this time, we have supported the operators through broad-based measures provided to affected businesses across different sectors, such as the Jobs Support Scheme (JSS). The grants given to the public transport operators have helped to ensure that our commuters, especially essential workers, can continue to travel to their workplaces, and arrive on time and safely.

Any changes to the industry models should be made with long term considerations in mind. We have to balance the value of competition with the benefits of economies of scale through consolidation. For the bus industry, the number of public transport operators has increased from two to four after the introduction of the BCM. The rail industry also now has two operators. The increased competition has spurred operators to improve service standards and submit more competitive tender bids.

New travel patterns have emerged amidst the COVID-19 pandemic, with flexible working arrangements becoming more common. We will continue to monitor how travel patterns evolve post-pandemic to assess the long-term impact on public transport ridership, and study if any adjustments are required to ensure financial sustainability as our public transport system continues to deliver high service standards.