Operating Cost Considerations in Transport Fare Reviews

Assoc Prof Randolph Tan asked the Minister for Transport (a) whether in decisions on fare reviews, the Public Transport Council balances considerations of the operating cost structure of public transport operators with ratings by commuters of the quality of their service; and (b) if it does not, what are the reasons for not doing so.

The Public Transport Council's (PTC's) decisions on fare reviews are guided by the fare formula, which was last reviewed by the Fare Review Mechanism Committee in 2013. The decision then was to address the issue of service quality outside of the formula, so that the Government can regulate and work with the operators independently to improve service levels. This approach keeps the fare formula relatively straightforward, without the complication of differentiating fare adjustments on account of service quality.

More importantly, it does not hinder our efforts to raise service levels. Since 2013, the rail network has been expanded by 20 kilometres and the train fleet for the North-South and East-West Lines (NSEWL), North East Line (NEL) and Circle Line (CCL) has increased by about 25%, significantly alleviating train crowding. As part of the Bus Service Enhancement Programme implemented from 2012, 820 of the 1,000 buses planned for have been deployed on the roads. In line with these service level improvements, the percentage of commuters expressing satisfaction with our public transport services rose from 88.5% in 2013 to 91.8% in 2015.

With the transition to the Bus Contracting Model and the New Rail Financing Framework, we expect service levels to improve further. However, the cost of improving service levels, and the corresponding extent of Government subsidies for public transport, will also increase. For instance, under bus contracting, the Government will be subsidising about $3.5 billion to $4 billion in the next five years. Similarly, on the rail side, due to the Government taking over ownership of the operating assets under the New Rail Financing Framework, the Government expects to spend over $4 billion on renewing, upgrading and expanding operating assets over the next five years. These will be on top of the $20 billion that the Government has committed to spend on building new rail lines in the same period. We are also requiring the rail operators to invest more heavily in maintenance to raise our rail reliability substantially.

Realistically, it is neither possible nor sustainable to improve service standards without having fares keep pace with the rising costs. The current fare formula is valid for five years including for the 2017 fare exercise. The PTC will review the formula before its expiry next year, and take into context the changes to the public transport landscape. A fine balance is necessary to ensure that our public transport system remains financially and operationally viable while fares remain affordable.