Are our public transport fares still affordable?

By September 24, 2019Current

TL;DR – Woo See Kee Woo See Lo!

The Public Transport Council (PTC) has just reported a maximum allowable fare hike of 7% next year. Nevertheless, it is easy to misconstrue the message as a definite fare hike of 7%.

What exactly is the Public Transport Council (PTC)?

The Public Transport Council (PTC) is the government regulatory body that reviews public transport fares and ticket payment services. It also advises the Minister for Transport on public transport matters. 

It was established in 1987 under the Public Transport Council Act (Cap 259B) to prevent ticketing fare evasion. Today, it focuses on keeping public transport fares affordable for commuters in Singapore, while ensuring sustainability of the public transport system.

Who sits on the Public Transport Council?

According to its official website, PTC’s Council Members are chosen from a wide spectrum of society including people from the academia, labour unions, professional services, businesses and also grassroots organisations. The idea is to have a broad and diverse representation from society.

The Council currently has 17 members, and many are regular users of public transport, and you can check out who they are here. 

What do our public transport fares pay for?

Well, our public transport fares go to paying for the public transport workers’ salaries, diesel and electricity, operational, maintenance and other costs. Yes, all very important things to help keep our public transport system running smoothly, safely and reliably 365 days in a year.

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Why do public transport fares always go up and never down?

Actually, this is #fakenews. It is not true that public transport fares always go up and never come down.

Take a look at the period 2014 to 2018. Public transport fares had one gone up twice in the five-year period, and the truth is we have seen three years of fare reduction in the same period.Via

 The PTC carries out a fare review every year, and this practice of annual fare adjustments help ensure that adjustments are aligned to economic conditions. It allows fare adjustments to be made in small, regular steps to moderate the impact on commuters.

How does the Public Transport Council carry out its annual review of fare adjustment?

Just like how Hong Kong and London do it, Singapore adopts a formula-based approach to set public transport fares. Our fare formula is reviewed every five years.

The current fare formula applies from 2018 to 2022, and is based on parameters that reflect changes in the operators’ operating costs. The fare formula takes into consideration cost changes due to inflation, wages, energy prices as well as network capacity. (Network Capacity Factor refers to the changes in the capacity of the public transport network, i.e. the number of bus and train trips relative to commuters’ demand.)

By considering all these factors, the formula ensures that our public transport fares will always be adjusted fairly.

So going by this formula, the PTC has allowed a maximum of 7% fare adjustment for next year. This means that public transport operators can adjust their fares upwards to a maximum of 7%.

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Are our fares still affordable?

The PTC cited the 3.5% wage increase and 1.7% consumer price index (CPI) increase for this year when explaining the 7% limit. These indices show that wages has increased more than inflation rate, hence the 7% maximum fare hike should be affordable for most Singaporeans.

Do note that the PTC prioritises the affordability of ticketing prices for Singaporeans, which is weighted at 90% (weighted at 40% and  50% for wage and CPI respectively).

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The PTC also looks at the percentage of household income spent on public transport, and it noted that this has been decreasing over the years. What this means is that the rate of wage increase has been higher than the rate of fare increase.

The Public Transport Affordability Indicator is an important indicator for the PTC as well, as this tracks fare affordability for the lower and average income families. The PTC has found out that today, lower income households spend 2.5% of monthly income on public transport fares, compared to 3.1% five years ago. 

So PHEW! Yes, our public transport fares are still very affordable. 

Is there help or support for those who need help?

Yes, while the public transport affordability indicator has improved over the years, there might still be people who need additional help with public transport fares.

The Government will assist through various community-led initiatives and work support schemes under the MSF/Community Development Councils and the CCC ComCare Fund.

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 So how did PTC arrive at the maximum allowable fare hike of 7%?

This year’s fare review exercise by the PTC has resulted in a cap on public transport operators to increase their ticketing fees to a maximum of 7%.

The PTC has cited that the largest contributing factor to the fee hike as the cost of energy. Petroleum products are often subjected to high price fluctuations and in Singapore where we have zero natural resources, we have to import everything.

The image attached shows the daily price of crude oil over 10 years. Hence, for fiscal sustainability, it is crucial to adjust prices.

 

Image Source: https://www.macrotrends.net/2480/brent-crude-oil-prices-10-year-daily-chart

Other than the energy factor, SMRT also implemented a series of corporate policies to address the rail reliability issue experienced in 2013 to 2018.

The most significant being the reorganization by SMRT Group CEO Neo Kian Hong late last year. He had shared with the media then that SMRT would be reorganised into five main groups, with a new engineering cluster formed to build and strengthen engineering capabilities. Surely recruiting and retaining engineering talent do not come cheap.

Ultimately, we have to acknowledge that the cost of operating a safe, reliable and efficient public transport system is not cheap affair.

The provision of salaries and staff-related costs, the cost of maintenance, the upgrading of digital signaling platforms, and new infrastructure have resulted in a net loss for the public transport operators. Its latest annual report shows that SMRT lost S$155 million for the financial year ending 31st March on the back of higher operating expenses. This amount is almost double from a year ago.

What is material to note is that spending on repairs and maintenance accounted for about 71% of rail-fare revenue, and this is up from just 45% three years ago. 

While fare hikes are generally unpopular, we can agree that public transport has improved since 2017 and 7% may not be unreasonable.

By the way, maximum of 7% fare hike translates to maximum 10 cents per trip.

 

Editor’s Notes:
SBS and SMRT have submitted their application for train fare review, PTC will announce its decision in the last quarter of the year.

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Kenneth Yeo

Author Kenneth Yeo

I'm the iron of the irony and the pun of the punishment.

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