Public Transport Council gives transport operators, a cap of 7% increase for fare adjustment exercise

The Public Transport Council (PTC) has commenced the annual Fare Review Exercise (FRE) for 2019 and has issued a maximum allowable fare adjustment quantum of 7% for the 2019 FRE for the transport operators to work on their fare adjustment applications.

PTC which is headed by Mr Richard Magnus, former Board Director of the Land Transport Authority, came up with the figure of 7% based on the new formula introduced last year that included a measure of Network Capacity Factor (NCF) which measures capacity provision relative to passenger demand for the entire public transport system.

It noted that the largest contributing factor for the fare formula output quantum is the double-digit increase in energy prices, having rebounded 26.2% in 2017, and 32.3% in 2018. Other macroeconomic price indices in the fare formula have also increased over the past year. PTC gave for as examples, the Wage Index, a proxy for the wage growth of public transport workers, went up by 3.5%, while the core Consumer Price Index rose by 1.7%, the highest in four years. The NCF is calculated at 1.6%.

Formula for Maximum Fare Adjustment= 0.5cCPI + 0.4 WI + 0.1EI – 0.1% + NCF

Public transport operators may submit their fare applications to the PTC by 23 September 2019 but the proposed fare adjustment must not exceed the allowable fare adjustment quantum.

Last year, PTC allowed a maximum fare adjustment of 4.3% to the transport operators for the 2018 FRE which it then adopted the maximum adjustment as the final decision for the fare adjustment.

PTC noted that more than 1,000 buses and 200 trains were added to augment the capacity of the public transport system over the last five years and the current rail reliability also improved significantly with an MBKF (Mean Kilometres Between Failure) of over 1,000,000 train-km, a more than seven-fold jump from 2015.

It added that the cost of operating public transport has been increasing with bus and rail service enhancements while average fares today are 4 to 7 cents lower than in 2015, just before fares were reduced 8.3% for three consecutive years, in part due to the dip in energy prices from 2015 to 2017.  It pointed out that the gap between costs and fares has been widening over the last five years and the gap has, thus far, been funded by the Government together with the rail operators.

“In its deliberations of fare adjustment applications, the PTC will consider the views of commuters and relevant stakeholders, and will continue to strike a fair balance between fare affordability and the financial sustainability of the public transport system. In considering fare affordability, the PTC will pay special attention to concession groups and needy commuters.” said PTC in its press release.

PTC will announce its decision on the fare adjustment quantum in the last quarter of 2019.