Average Productivity Gain Achieved by Public Transport Operators in Past Five Years

Mr Gerald Giam Yean Song asked the Minister for Transport (a) what was the average productivity gain achieved by the public transport operators over each of the previous five years; and (b) what was the Network Capacity Factor, as set out in the previous fare adjustment formula, for the period since the previous Fare Review Exercise; and (c) where did the productivity gain mostly come from for this current Fare Review Exercise.

The Public Transport Council (PTC) reviewed the fare adjustment formula and mechanism in April this year. As explained by the PTC and in this House, the new formula accounts for productivity and network capacity differently. Mr Giam's questions on past productivity gains and the Network Capacity Factor (NCF), pertain to the old fare formula, which is not meaningful in the current context.

On productivity, the PTC has reaffirmed the role played by operators in ensuring that our public transport system is cost-efficient and this is reflected in both the previous and current fare formulas.

The previous formula included a Productivity Extraction, which shared half of operators' actual productivity gains over the previous five years, measured by growth in value added per employee, with commuters. As outlined in the PTC's Fare Adjustment Formula and Mechanism Review Report available on its website, there were exceptional circumstances during the last five years, which had an impact on productivity. During the pandemic, there was a sharp drop in public transport ridership, which has yet to fully recover. This resulted in lower fare revenue and significant losses for the operators, as well as productivity losses. Based on the previous formula, the Productivity Extraction would have been set at 0% and commuters would not benefit from a lower fare adjustment quantum.

Hence, the PTC recommended to replace the Productivity Extraction with a Productivity Contribution, set at 0.1% in the new formula, which is at the same level as the Productivity Extraction applied for the preceding five-year period. This sets the expectation for operators to improve productivity, which in turn reduces the fare adjustment quantum for commuters.

On capacity, the new formula includes a Capacity Adjustment Factor, based on the smoothened growth rate in public transport capacity, fixed at 1.1% for five years, from 2023 to 2027. This replaced the NCF in the previous formula.

The NCF was intended to track cost movements due to changes in public transport capacity, relative to changes in commuter demand. In its first three years, the NCF ranged from 1.6% to 3.9%. However, the NCF was not designed for exceptional situations, such as the COVID-19 pandemic, when ridership fell sharply and the NCF spiked to 50% in 2021. As such, the NCF was suspended from the onset of the pandemic and has now been replaced by the fixed Capacity Adjustment Factor.