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Leong Sze Hian questions the PTC's new formula for fares.

New formula protects profits for transport companies

Leong Sze Hian

I refer to the new formula for the increase of public transport fares, announced by the Public Transport Council (PTC) on 10 July. (Channel NewsAsia)

With the heightened possibility of an impending fare hike, let’s look at some of the issues.

In the past, we talked about it after the decision was made. I suggest that we debate the issue now to try to influence the decision.

The 3 per cent cap for the fare increase is 67 per cent more than 2007's cap of 1.8 per cent.

Since “the restructuring should be largely revenue-neutral to the transport operators”, the revenue and profits of the transport operators may increase because of increased ridership due to the growing population and more visitors to Singapore, and of course any fare increase that may be approved by the PTC.

If it is revenue-neutral, the statement that “the new fare system... is expected to benefit 40 per cent of passengers who make transfers today”, may mean about 60 per cent of commuters may end up paying more.

I also do not see the logic of including a CPF component in the new formula for public transport fares.

The inclusion of the Average Monthly Earnings (National Average) in the formula for the 1.5 per cent change in the employer's CPF contribution rate is nonsensical as CPF cannot be used like cash to pay for fares.

Using the new formula for the next five years may be catastrophic for lower income commuters, as this year's inflation and wage increase are expected to be very high.

For example, if inflation is 5 per cent, and wage increase is 6 per cent, the increase in fares next year would be 4 per cent (0.5 x 5 + 0.5 x 6 – 1.5).

There have been 9 fare increases from 1994 to 2007.

Feeder bus fares increased by 91 per cent, or about 7 per cent per annum, from 30 cents in 1995 to 67 cents in 2007.

Profits of the 2 transport operators also rose. ComfortDelgro’s profits increased from $134 million in 2003 to $223 million in 2007. This is an increase of 66 per cent, or about 14 per cent per annum.

SMRT’s profits increased from $72 million in 2003 to $136 million in 2007. This is an increase of 89 per cent, or 17 per cent per annum.

According to this Straits Times report:

SMRT Corp posted net earnings of $150 million for the year ended March 31, 2008, while SBS Transit made $50 million last year (its parent ComfortDelGro netted $223 million).

A question which has been asked in previous debates about fare increases is this: How much is enough for our transport companies? And why does the Public Transport Council seem more interested in protecting the profits of these companies than the welfare of the commuters?

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[1] Budget 2003: “Motor vehicle taxes are expected to increase by 34.2% to $ 1.99 billion owing to less preferential additional registration fees rebates”

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