Debated in Parliament on 17 Feb 2014.
Order for Second Reading read.
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Mr Deputy Speaker, I beg to move, "That the Bill be now read a Second time."
This Bill seeks to make changes to the Rapid Transit Systems Act to improve LTA's regulatory oversight over the Rapid Transit System (RTS) licensees and enhance LTA's ability to develop commuter facilities at MRT stations and ensure the timely construction of RTS works. There are four key areas of change.
Let me first address the changes in the Bill to increase the maximum penalty for rail incidents.
Earlier this afternoon, I updated the House on the progress made in improving rail reliability. This progress has come about because the rail operators have invested substantially more in maintenance, and implemented targeted measures to address train and system-related issues identified by the joint LTA-rail operator teams. While we will continue to work collaboratively with the rail operators to improve the reliability and performance of the rail system, this must be complemented by effective licensee regulations.
Following the conclusion of the Committee of Inquiry investigations in 2012, LTA undertook a review of its rail regulatory framework to set higher Operating Performance Standards (OPS) for service levels, and more prescriptive and stringent Codes of Practice for maintenance and incident management. I am sure the House will remember that this is brought forward in 2013. The intent is to achieve better reliability and service levels for commuters, by enhancing the penalties for operators if they fail to prevent rail incidents and properly manage their impact on commuters and to ensure that they strengthen their maintenance regimes and operations.
To this end, we have tightened the OPS, which will progressively take effect from 1 January this year. Rail operators are now required to ensure that train frequencies do not exceed five minutes, except during periods of extremely low ridership in the early hours, morning or very late at night. New OPS will also hold operators accountable for short service delays. In addition, LTA has mandated more stringent and prescriptive Codes of Practice, which would require rail operators to review their maintenance regimes periodically, monitor and analyse trends of faults and defects, and submit reports of the trend analysis and follow-up measures to LTA. The overall maintenance approach for our rail system will also shift from a posture where we reactively "detect and rectify", to one where we proactively "predict and prevent". With stricter
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regulation of train frequencies and maintenance regimes, commuters will benefit with shorter waits for trains, and greater assurance that train journeys will not be interrupted by train faults and delays.
In tandem, LTA has recalibrated its penalty guidelines for each category of regulatory breach to better reflect the severity of incidents and their impact on commuters, and enhance their deterrent effect. RTS licensees are now subject to lower tolerance and higher penalties for individual categories of regulatory breach. Overall, any incident involving multiple breaches and service disruption will warrant a higher overall financial penalty than today.
To effect this, clause 8 of the Bill therefore amends section 19 of the RTS Act to raise the maximum financial penalty for each rail incident to 10% of the annual fare revenue of the licensed rapid transit system affected, or $1 million, whichever is higher. Unlike the previous maximum quantum of $1 million, setting the maximum penalty as a percentage of the fare revenue makes it commensurate with the scale of operations of the affected rail system.
When deciding on the 10% maximum penalty quantum, we studied the maximum penalties of other domestically regulated services, such as energy and telecommunications. We also looked at other jurisdictions such as France and the United Kingdom.
We will continue to channel penalties paid by RTS licensees into the Public Transport Fund, to fund schemes that would benefit public transport commuters such as Public Transport Vouchers for needy households.
Sir, the second set of changes to the RTS Act is to enhance LTA's regulatory powers over the board composition of RTS licensees. Clause 7 of the Bill introduces a new section 18A, which empowers LTA to compel, if the situation warrants, an RTS licensee to augment its board.
This is to ensure that the boards comprise the appropriate and relevant range of expertise and experience, including engineering background, needed to fulfil their primary role as public rail transport operators. We do not envisage invoking this provision lightly, as it is intrusive. However, this provision helps ensure that boards take a longer term, more sustainable view of operations, and ensure that the board is adequately equipped to discharge its responsibilities.
To enforce the power given to LTA under section 18A, clause 8 includes non-compliance as an offence for which LTA may impose a penalty under
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section 19.
Sir, the third set of amendments in the Bill gives LTA further powers to develop our railway facilities to benefit commuters. Currently, there is no legislation that enables LTA to fit stations with commuter facilities, such as bicycle racks, except where the additional facility falls on State land within or adjoining road reserves. By amending section 4 of the RTS Act, clause 3 of the Bill allows LTA to enter State land, even if it is not adjoining road reserves, but as long as it adjoins the railway area, to construct facilities for railway commuters.
In addition, clause 2 amends section 2 to introduce a new definition of "railway commuter facilities", which expressly includes bicycle racks, lifts, escalators, staircases, ramps and other amenities to enhance connectivity to MRT stations. Through clause 6 of the Bill, LTA is now empowered to develop these railway commuter facilities and to require the rail operators to maintain them as part of the station premises.
The final set of amendments in the Bill enhances LTA's access to private land for the timely completion of RTS construction and improvement works. Currently, under section 5 of the RTS Act, when private land is affected by RTS construction works, land owners receive a two-month advance notice prior to occupation. There have been, however, instances where private land owners refuse to surrender their land after the two-month notice period, or demand that compensation be agreed upon before granting access.
Clause 4 of the Bill hence amends section 5 to introduce a new penalty of up to $1,000 to deter land owners or occupiers from denying, obstructing, hindering or delaying LTA's access to private land for RTS construction works after LTA has fulfilled the requisite two-month advance notice period. This penalty quantum is aligned to the current penalty under section 9 for occupiers who impede the LTA's rightful access to both State and private land for inspection and survey purposes. For consistency, clause 5 also amends section 9 to align the exact circumstances under which occupiers may be penalised for such obstruction of rightful access, with the circumstances stated in the amended section 5.
In summary, this Bill strengthens the LTA's regulatory oversight of the RTS licensees. It enhances its ability to develop commuter facilities at MRT stations, and supports the LTA's exercise of authority as Singapore's railway developer.
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With these amendments, LTA will be able to better achieve its overall improvement plan for the rail system to restore reliability, to raise service standards and to enhance rail connectivity for commuters' benefits. Sir, I beg to move.
Question proposed.
Mr Deputy Speaker, I welcome this Bill to further strengthen powers of LTA to ensure that the public transport licensees discharge their responsibilities to provide a reliable and sustainable rail system to serve the public commuters.
Apart from enhancing the LTA's regulatory powers, this Bill also enhances LTA's ability to improve the rail network's connectivity to meet diverse commuter needs.
Service reliability has been an issue of concern for commuters and, indeed, there have been a number of significant service disruptions. MOT and LTA have taken serious steps since the Committee of Inquiry was concluded in 2012 to tighten the regulatory regime for our MRT operators.
As with all other regulatory measures, setting high operating and maintenance standards alone is not enough. These must be complemented by sufficient deterrence against failure to comply and effective enforcement. With the tightened regulations and higher standards, an increase in the maximum penalty is thus necessary.
A regulatory penalty must be set sufficiently high for deterrence purposes, and it must also reflect the true cost of non-compliance. The MRT system is a critical infrastructure and is extremely important for the daily lives of Singaporeans. A serious disruption today causes extreme inconveniences to commuters, especially if it occurs during the peak hours. Time is lost, incomes are affected, and trust in public transport in general gets eroded. There are social costs to poor public transport reliability, on top of economic costs.
In this regard, it is useful to take reference from the maximum regulatory penalties for other essential services, such as energy regulated by EMA and telecommunications regulated by IDA, which are also set at 10% of licensees' turnover. The higher level of maximum penalty gives LTA greater flexibility in
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calibrating an appropriate level of penalty to be imposed on an errant MRT operator, according to the nature and severity of the incident.
However, I want to add that penalties imposed on service disruptions are after all still reactionary measures; in other words, where the damage is already done. I would urge LTA to be more pro-active in identifying potential service disruption risk within each of the PTOs as well as regular compliance audit to assess the robustness of the licensees' maintenance regimes, similar to the way MAS supervises the banks. Taking preventive or even pre-emptive measures, if necessary, to sharply minimise disruption risk is still the preferred approach.
This is why I support this other set enhancement measures in the Bill to enhance the regulatory power over the licensees' board composition.
The power for LTA to approve the appointment of RTS licensees' Board Directors already exists in the RTS Act. This power will be extended, for LTA to require RTS licensees to augment their Boards if necessary, to ensure the Boards have the expertise and experience, including relevant engineering experience and sufficient independent perspectives, to administer their roles as public transport operators. This is again not new for the other industry. For example, in the banking sector, MAS has fairly wide powers over appointments of bank directors and the key executive appointments, including requiring the key officers to undergo a fit and proper test.
However, these enhanced powers should not remove the responsibility of the board of PTOs to assemble the best team possible, both to help ensure the fiduciary interests are protected as well as to ensure that customers' needs are also well served.
Ideally, LTA should never have to invoke these powers but if the situations call for it, LTA must be empowered to take the necessary interventions to preserve public interest.
Finally, I welcome the new definition of the "railway commuter facility" in section 2 of the Act, which specifically mentioned about bicycle parking facilities, pedestrian overhead bridges, footpaths, ramps, lifts and other similar structures and facilities that integrate the rail system with developments around it so as to maximise patronage of the system.
The RTS Act was originally enacted in a period where the connectivity provisions were at a more basic level. Today, however, commuters have diverse
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needs for their daily commute. For instance, the elderly and the mobility-challenged are increasingly taking steps out of their homes to remain active. This is very positive and should be encouraged. As our society ages, we need to better support the mobility needs of our silver generation.
We are also seeing more modes of travel, in particular, the increasing trend of cycling to neighbourhood destinations and the MRT stations. The amendments in the Bill, which enhance LTA's ability to meet these diverse commuter needs, are timely and integral to our overall efforts to build an inclusive society.
I like this definition in section 2 of the Act and the new emphasis, that is, besides the task of building a major infrastructure, it should be also about delivering the "last 5%" of our transport service even better. Take the example of the Downtown Line, where we spent tens of billions of dollars to build an underground line right into the heartlands. But the initial design at Bukit Panjang MRT station only provided two underground accesses, which would have resulted in a large proportion of commuters having to cross a busy junction to get access into the station. Imagine doing this on a daily basis during morning and evening peaks and during bad weather. I am glad that LTA finally agreed to build a third underpass access after some lobbying to avoid such a situation.
These are thoughtful things or the so called "last 5%" that will give commuters a positive experience in their daily commuting. Mr Deputy Speaker, with that, I support the Bill.
This Bill seeks to amend the Rapid Transit Systems (RTS) Act by enhancing the financial penalties that may be imposed for regulatory defaults by licensed MRT operators, also referred to as "licensees". It also enhances the powers of LTA in relation to the appointment and removal of the CEO, chairman of the board of directors and directors of a licensee.
Currently, in the event of a regulatory default, a licensee will be liable for a fine of up to $1 million. This Bill seeks to provide LTA with the option of imposing a fine of up to $1 million or up to 10% of the licensee's annual fare revenue, whichever is higher.
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In the history of the MRT, the maximum fine of $1 million has only been imposed twice. SMRT was issued a $1 million fine for each of the massive service disruptions on the North-South and East-West lines that took place on 15 and 17 December 2011, which affected over 221,000 commuters.
The move to peg the maximum penalty at 10% of annual fare revenue raises the financial risks for the two operators. However, despite the maximum penalty being imposed for the December 2011 disruptions, there has been no consistent decline in the number of incidents on the MRT network causing delays since then. In fact, the number of incidents causing greater than five- and 10-minute delays increased from 2011 to 2012 before declining slightly in 2013. This does not give very much reason for hope that increasing the penalties further will improve service levels.
The MRT operators include the penalties as part of their operating expenses. In its most recent annual report, SMRT stated that its "other operating expenses saw an increase of 8.8% to $204.5 million, due mainly to higher legal and professional fees and a $2.0 million penalty imposed by LTA for the December 2011 train service disruptions" as well as other expenditure.
During the operators' last application for fare adjustments, they cited higher operating expenses as one of their key justifications for fare increases. Hence, the penalties could be indirectly contributing to fare increases. When the PTC examines the public transport operators' (PTOs') requests for fare increases, which include reason of higher operating expenses, does it factor out the fines that the PTOs have incurred for service lapses?
Next, penalties imposed by LTA for service disruptions are donated to the Public Transport Fund, which is used to buy transport vouchers for needy commuters. This means that the fines paid are eventually returned to the operators in the form of fare revenue.
Finally, the Bill stresses that financial penalties "still cannot be imposed on a licensee by the LTA if the licensee is likely to fail to provide and maintain an adequate, safe and satisfactory service". This provides yet another safety net for the MRT operators, who may claim that a penalty is too large for it to bear without impacting maintenance and service quality.
Will all these circumstances surrounding financial penalties neutralise their deterrent effect and render them a rather ineffective mechanism for ensuring
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good performance?
Furthermore, financial penalties are imposed on the company and do not directly impact the people who are in a position to improve service quality and reliability – that is, the top management of the PTOs. There is nothing in the RTS Act that stipulates that bonuses or salaries must be cut, or heads must roll if senior managers fail to meet their KPIs and major disruptions occur too frequently.
The most the regulator can do, under this Bill, is to direct the licensee under section 18A(2) to remove a CEO from his or her position, but it appears that this can only be done if LTA never approved of the appointment of that CEO in the first place. Could the Minister clarify? If LTA had approved of the appointment of a CEO, and that CEO subsequently fails to perform, can the LTA direct the licensee to dismiss him or her?
Besides influencing the appointment of the CEO and directors on the board, would the Government consider introducing other regulations to make senior managers of PTOs more personally accountable for the quality and reliability of their MRT services?
For example, the LTA could require licensees to name the individual who is assigned crucial responsibilities like rail and train maintenance, so that when regulatory action is taken against the company, the LTA will know which senior people should be held responsible, and, if necessary, censured. I believe this approach could be more effective in keeping the PTOs on their toes than imposing large fines on the company.
Mr Deputy Speaker, Sir, I support this Bill's provisions to enhance LTA's regulatory framework through increasing the amount of financial penalty and conferring additional powers on LTA. These are in line with the general direction to strengthen LTA's regulatory framework. However, we believe these are not sufficient.
A more outcome-based approach allowing LTA to remove the CEO of SMRT will be required. By this, I mean that LTA must set key performance indicators (KPIs), such as: less than 0.5% of train rides over the last six months should be delayed; less than 0.1% of train rides over the last six months should come to a complete fault for more than 10 minutes. When these KPIs are not met, the
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Government must have the consideration and the mandate to remove the CEO of SMRT. I understand that this may seem like a narrow corporate KPI compared to the other priorities, such as profitability and cashflow, but SMRT delays and breakdowns affect national productivity.
We do not believe that financial penalty works. SMRT is an asset- and cash-rich firm. They also have the ability to recover penalties through increase in fares and rentals of their assets. So, I think the company would not be penalised as much as we think they would. Other measures like clauses in future contracts to cease their services and the option to remove their CEO will help to better align the transport KPIs.
LTA cannot remain as a policy-maker. I urge the LTA to introduce prescriptive and technical requirements on SMRT. I also urge that these standards be imported from the most competitive transport systems around the world. We expect productivity increases from all our sectors. I think it is fair to expect the same from a state-owned enterprise. I think it is also fair for MOT and LTA to call for external audits on SMRT's operations. It is not intuitive why SMRT is allowed to call for its own audits, as recommended in the latest COI framework.
Lastly, we believe the responsibility for public transport in Singapore should not just rest with the CEO of SMRT. I think it is fair to have a senior officer in MOT at the level of Deputy Secretary or Permanent Secretary to be made personally responsible for the rail transport system in Singapore.
Minister Lui.
Mr Deputy Speaker, I thank Mr Liang Eng Hwa and Ms Lina Chiam for their expressed support for this Bill. Maybe I should ask Mr Gerald Giam, first of all, does he support or does he not support the Bill. Yes or no?
*Hon Member indicated assent. (proc text)]
He supports the Bill. Then, we do have support for the Bill. We all agree that train services are a critical part of the transport network. It is really critical to not only our daily activities but also to the economy. Therefore, we take a couple of directions in order to try and improve the overall
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reliability of the service that I will get into. One is to enhance the standards to make sure that the joint teams that have been established by LTA and the operators pay even greater attention, not only to finding and fixing the faults but also to proactively predict and prevent, meaning more attention to trend analysis, more attention to the faults that may be coming up, more attention to doing enhancements even before they are needed. That is important. At the same time, we also recognise the need, just as they have done in the telecoms infrastructure and the energy infrastructure, to look at the appropriate financial penalties that ought to be imposed on this, because these are some of the critical sectors that provide a public good and an essential service to residents.
I know that both Members were not in the House earlier when we had a series of Parliamentary Questions (PQs) that were related to reliability. Perhaps, to say that there had been no consistent improvement in reliability may be unfair, so I would try to just summarise some of the key points that I talked about in my earlier reply.
I said that I look at two aspects or two indicators that are most critical to me: incidents that delay the trains for more than five minutes. Anything beyond five minutes I pay a great deal of attention to it. The second is unplanned withdrawals of trains from service. Sometimes, these are longer than five minutes but on a number of occasions, shorter than five minutes. Three minutes, for instance. But even during a peak hour period, such unplanned withdrawals can really have a very disruptive effect on the movements of people.
This number of delays in 2013 is lower even than the 2010 levels. It works out to less than one such delay on the North-South East-West Lines and the North-East Line every day out of more than 2,000 train trips operated on these lines. Or put in percentage terms – I have worked it out and my Maths is a little bit better now – 99.95% of train trips operated on a daily basis across the North-South, East-West Lines and the North-East Line do not face any delays, or if they face delays, delays of less than five minutes, it is 99.95%.
The next would be train withdrawals. Train withdrawal rates for the North-South East-West Lines have also fallen from 3.32 per 100,000 km travelled in 2012, to 2.25 in 2013. This year, our target is to try to reach 1.8 such withdrawals. But from 3.32 to 2.25 is a 30% improvement over that course of the year and it restores the train withdrawal rates close to what it was in 2010. For the NEL and
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the Circle Lines, we have seen a more than 25% reduction in train withdrawal rates from 2012 to 2013, with withdrawals for the Circle Line at its lowest since its opening in 2009. So, I thought we should have the more current data on that, which I gave to Members a little bit earlier.
There was a second point that was made which is, whether penalties contribute to fare increases. We have gone through this in the House before, the formula past and the fare formula current which was put together by the Fare Review Committee (FRMC), chaired by Mr Magnus, in which a fare formula takes into account three factors: one, the core CPI; two, the wage increase; and three, the energy index. This is part of the new formula, and then there is a productivity extract. Nowhere in the formula does it take into account the penalties that are paid by the operators into the Public Transport Fund and I believe that that would continue to be so even in future should we need to review the formula. In the past as well as in the present, there is no provision in the fare formula for operators to recover their penalties through the fares.
A third is on cutting bonuses and heads rolling. I would have to say that I am less interested in heads rolling. I am more interested heads fixed on and focused on identifying as well as resolving the problems, and tackling the challenges and making sure that we have a systematic way to deal with the issues at hand.
Whether the CEO should be removed or not, I leave it to the Board. That is part and parcel of the Board's responsibility: to identify the most appropriate person or to remove him or her should they deem it necessary.
The amendment to the Act that we have now would be for us to make sure that LTA has the ability to ask for an augmentation in the composition of the Board should it be skewed in a particular direction and if we feel that the Board is lacking in certain expertise. The expertise that concerns me most is engineering expertise and that is where I would like to have an augmentation if we deem that the Board is not sufficiently composed of the right people to give it the expertise. At the end of the day, it is not so much of a commercial entity as it is an engineering and operating company.
So, I hope that some of these clarifications would have helped. I, once again, thank all three Members who have spoken for expressing their support for the changes that we are going to make for the Rapid Transit Systems Act.
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*Question put, and agreed to.*
*Bill accordingly read a Second time and committed to a Committee of the whole House.*
*The House immediately resolved itself into a Committee on the Bill. – [Mr Lui Tuck Yew].*
*Bill considered in Committee; reported without amendment; read a Third time and passed. (proc text)]
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