Possibility of Fare Reduction with New Operating Models for Public Transport

Mr Gan Thiam Poh asked the Minister for Transport (a) whether the Public Transport Council (PTC) will consider a reduction of public transport fares in the next annual fare review; and (b) whether there will be a review of the fare formula in view of the recent changes to the operating models of public transport.

Based on the fare formula, I expect the Public Transport Council, or PTC, to consider a maximum fare reduction of 5.7% for the upcoming fare exercise. This fare reduction quantum is due to the sharp fall in energy prices over the last year. However, we should note that energy prices can be volatile and may rebound sharply in the following years.

The current fare formula, which was introduced in 2013, is valid for five years, including for the 2017 fare exercise. It will be reviewed before its expiry next year.

I do not wish to pre-judge PTC's future deliberations on this. However, I think we should keep in mind that in response to higher commuter expectations, the Government has been rapidly expanding our rail network and injecting more buses and trains into the system and also making costly improvements through restructuring the bus and rail industries. While these initiatives have improved our public transport system significantly, they have and will continue to increase the extent of Government subsidies in public transport. For instance, under the Bus Service Enhancement Programme, the Government has committed $1.1 billion over five years. Under bus contracting, the Government will be subsidising about $3.5 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 Model, the Government expects to spend over $4 billion on renewing, upgrading and expanding operating assets for 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.

In many major cities, public transport is subsidised. However, we need to guard against it becoming an excessive fiscal burden. The new fare formula will have to strike a balance between fiscal prudence and ensuring that fares continue to remain affordable.