Impact of Falling Oil Prices on Public Transport Fares

Mr Gan Thiam Poh asked the Minister for Transport with regard to the ongoing 2014 fare review exercise by the Public Transport Council (PTC), whether the PTC will consider a reduction of transport fares as a result of the fall in oil prices since June 2014.

Mdm Speaker, the fare formula is pegged to changes in the Core Consumer Price Index, Wage Index and Energy Index over the preceding year and reflects the operating cost structure of the public transport operators. So, the Core Consumer Price Index and the Wage Index will each account for 40% of the fare formula, while the Energy Index will account for 20%. For the ongoing fare review exercise which we began in November 2014, we are looking at changes in the indices in the year 2013. It is important to remember that while we started in November 2014, we used the data and indices in the year 2013.

Energy and fuel costs are reflected in the Energy Index component, as mentioned earlier, which accounts for 20% of the fare adjustment quantum. The value of this component for the on-going 2014 fare review exercise is negative 12.6%, due to lower energy prices in 2013.

However, the Core Consumer Price Index and Wage Index, which make up the remaining 80% of the fare adjustment quantum, had gone up in 2013, and they are plus 1.7%

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for the Core Consumer Price Index and plus 4.3% for the Wage Index.

Taking these changes in the indices into consideration, the fare adjustment quantum for the year 2014 yielded by the formula is negative 0.6%. So, for 2014, using the index indices in 2013, the formula yielded negative 0.6%.

Some of you may recall that in the last fare exercise, the fare adjustment quantum was 6.6%. However, it was assessed that 6.6% would be too much of an increase in one go, and the Public Transport Council therefore decided that it would implement only a 3.2% increase in the 2013 fare review exercise and carry over the remaining 3.4% to the on-going 2014 fare exercise.

So, when we add this year's negative 0.6% to the carried-over 3.4%, we get the fare adjustment quantum of 2.8% for the ongoing fare review exercise. If I put it another way, supposing we had implemented the full 6.6% fare adjustment quantum in the previous fare review exercise, and we did not carry over 3.4%, then, indeed, we would have a fare adjustment for this year that is negative, and it would be negative 0.6% this time round.

If I look ahead to the next fare exercise, and this is the fare exercise that we will conduct towards the end of this year, called the 2015 Fare Review Exercise, and this is using the data from the full year of 2014, the drop in 2014's energy prices could possibly translate to a negative fare adjustment. Based on available data, and we do not have the full year's data as yet, I would have to say that it could be in the region of negative 1%.

What I have just provided are the numbers according to the fare formula. We will have to leave it to the Public Transport Council to assess the public transport operators' applications for fare increase, the fare adjustment quantum as given by the formula, and the affordability of public transport for Singaporeans, amongst other things, and decide on the fare adjustment.