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NSP: Bus operators enjoy the profits while costs passed to commuters under new BCM scheme.

NSP: Bus operators enjoy the profits while costs passed to commuters under new BCM scheme.
May 29
18:51 2014

The National Solidarity Party (NSP) has issued a statement in response to the new Bus Contracting Model (BCM) annouced by the Transport Minister on 21st May 2014 which seeks to nationalise assets but privatise operations.

NSP states that the party had already proposed a route licensing scheme in 2011 as it highlighted that “it would be unrealistic to expect state-run organizations, usually large and cumbersome, to be able to respond speedily to rapid changes in demand, and that what is needed is more competition.”

The party explains that the distinct difference between the BCM scheme and NSP’s route licensing scheme proposal is that while both are contracting models for bus operations, the party’s proposal is premised on the buses being owned by the bus operators. Whereas the Transport Ministry’s BCM scheme will see all bus operating assets including the buses being owned by the Government.

The party questions if the role of the public transport operators would be merely function as labour supplies for the government owned bus system.

It is said that the BCM is in fact an excellent exit strategy for the two public transport operators since bus operations for SMRT and Comfort DelGro reportedly lost $28.4 million in the financial year 2013 and $14.3 million in the same year.  The two companies can then shed its operations and assets that are not lucrative and which depreciate every year.

NSP points out the signs of profit for transport operators under the new scheme,

“Since the announcement of BCM, the price of SMRT Corporation and Comfort DelGro shares have reached highs never seen in many months.  Foreign land transport operating companies have also expressed interest in entering the fray – all signs pointing to the fact that the current public transport operators expect to reap a handsome profit under the BCM scheme, without bearing sufficient risks for running the business.”

It also notes that the government would have to buy more buses to add to the current bus fleet to cater for the increasing population and new routes. This is apart from the 800 buses brought through the Bus Service Enhancement Programme (BSEP) which cost $1.1 billion .  With the BCM, the Government will be responsible for these buses.

The Land Transport Authority has yet to indicate whether it will buy all existing buses, or acquire them when they are due for replacement. Apart from this, NSP states there are still many unanswered questions with the BCM scheme:

  • What will determine fair value for the buses if Transport Ministry decides to buy the existing fleet of buses from the two operators?
  • How many more buses will the Government need to add to the existing fleet to cater to the population growth?
  • If 800 buses under the BSEP cost us $1.1 billion, how much will it cost to replace an aging fleet of buses and to get new buses? and its costs of repairs and maintnance?
  • Will multiple operators be allowed to run in each of these bundled packages, or will only one operator have exclusive right in the bundled package that it successfully tendered for?
  • If each bundled package has only one operator, how will efficiency increase and waiting times decrease if there is no real competition in the routes?

The party notes that there is a real risk that even as operators enjoy the profits and costs will be passed down to the commuters and/or tax-payers under the BCM scheme and it is unsure how the BCM will benefit commuters and whether the BCM will burden commuter and/or taxpayers with higher costs.

NSP hopes that the Government would seriously re-consider its earlier proposal – the route licensing scheme – to introduce more competition and to further liberalise the Public Bus Industry.

For the party’s statement, please visit National Solidarity Party’s website here. 

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