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Analysis of PTC’s news release on fare increase

By Leong Sze Hian

I refer to the Public Transport Council's (PTC) News release on 11 September, on the increase in bus fares from 1 October.

I would like to comment on the following:-

"PTC considered Singapore's economic outlook and the affordability of public transport. The economic outlook has been positive with the latest GDP gowth forecast for 2007 revised upwards to 7 to 8% and the unemployment rate for June 2007 at 2.4%, the lowest in 5 years."

Will the positive economic outlook reverse the trend of declining nominal wages (before inflation-adjustment) for about the bottom 30 percentile of workers?

Unemployment has actually increased

Although overall unemployment was the lowest in 5 years, according to the Ministry of Manpower's (MOM) 2nd quarter report on employment, "among the resident (Singaporean and permanent resident) labour force, the non-adjusted unemployment rate was 4.2%... higher than (the) 3.4% in March 2007"

The estimated 79,600 unemployed residents, was higher than the estimated 66,000 last quarter.

So, the resident unemployment rate went up, and the number of resident unemployed has increased!

Return on Total Assets

"ROTA (Return on Total Assets) in 2006 of SBST (Bus and Rail) and SMRT (Bus and Rail) was 7.9 and 11.4% respectively.

These are higher than the 6.5 and 9.1% respectively in 2005.

The Ministry of Transport has said that these 6.5 and 9.1% ROTA "returns are healthy but not excessive, compared to companies with similar industry structures and risk profiles".

Since ROTA has increased by 22% (7.9 divided by 6.5) and 25% (11.4 divided by 9.1) over the last year, how can a fare increase be justified on the basis of ROTA?

Why do we always seem to be comparing with countries and companies with high ROTAs?

Why don't we compare with public transport companies in countries with lower ROTA?

Comparing with other countries – use a fairer approach

Why do we always seem to be comparing average fares with cities like Hong Kong, London and New York City, which have higher fares than Singapore?

Why don't we compare with other lower fare cities and countries as well?

As cities like London and New York City have multi-modal bus passes, an average fares comparison may not be very appropriate.

Don't we realise that the median wage in these cities are much higher than Singapore's (about $2,050) ?

With the Residential Feeder Services Aircon Adult fare increasing from 65 to 67 cents, has the PTC done any analysis on the percentage rate increase of fares for feeder services over the last 8 years?

In this connection, a local university study found that about 15% of commuters walked a straight-line distance of more than one kilometre, despite the availability of feeder services. Has the high rate of increase in feeder service fares deterred people from using them because of affordability?

Transport vouchers – to cover only one year’s increase?

As to the $30 transport vouchers to be given out to needy commuters, has the PTC reconciled the number of transport vouchers (total funding amount divided by $30) with the number of people who live in households with monthly income below $1,500?

Is it not obvious that giving $30 or $20 whenever fares are increased does not take into account that it only covers one year's increase? Shouldn't transport vouchers be given to reflect 7 years' increases over the last 8 years?

The PTC report makes no mention of the ever increasing record profits of the transport operators, or the possible effects of the GST hike.

Flaws in the Fare Adjustment formula

As there are more than 500,000 cars in Singapore, how can the Fare Adjustment Formula be based on average Wage Increase?

Shouldn't it be the median wage increase to reflect the fact that it is the lower-income who take public transport?

As the CPI (inflation) for the lower-income is much higher than the higher income, shouldn't the formula be based on the CPI of those who take public transport rather than the average CPI?

Why is the Public Transport Affordability Index (PTAI)* on a downtrend since 2003, when as I understand it, the MEPT has been increasing due to yearly fare increases and declining wages for the bottom 30 percentile of workers?

As to "the average wage growth was 5.5% for the 1st quarter of 2007", I understand that the median wage has hardly moved in real terms (after adjusting for inflation) over the last few years.

$30 per year vouchers for the poor. Adequate?

According to the Straits Times report, “100,000 needy families to get $30 transport vouchers”,Straits Times, 12 September, it says:

Among commuters who have to make one transfer to another trunk
bus, they will see a fare increase of at most 4 cents.

For example: A bus journey from Ang Mo Kio to Alexandra Road with a
transfer at MacRitchie Reservoir currently costs $1.583. From 1st October,
the commuter will see an increase of 3 cents to $1.61 (a 2-cent increase
for the 1st leg and a 1- cent increase for the 2nd leg). This is an increase of
6 cents per day or about $1.32 per month.”

If “they will see a fare increase of at most 4 cents”, why is the example one which shows a 3 cent increase per trip of 6 cents per day?

Based on just 2 trips a day, 30 days a month, an increase of 6 and 8 cents a day, works out to $21.60 and $28.80 a year, respectively.

So, does it make sense that the “Transport Ministry spokesman estimated that, typically, a single voucher ($30) could defray a poor family's fare increase cost for one year”

$30 a year for a typical poor family of 3 to 4 persons can cover $21.60 or $28.80 fares increase per person?

Do more Singaporeans generally take buses more often and spend more on buses than trains?

*(Monthly Expenditure on Public transport (MEPT) divided by Monthly Household Income (MHI)