Why raise fares now ?
Mon, Sep 15, 2008
The Straits Times
Public Transport Council has announced new fares for transport from Oct 1. One journalist gets a few pressing questions answered. -ST Maria Almenoar
THE Public Transport Council (PTC) yesterday announced new fares for public transport, which will take effecton Oct 1.
MARIA ALMENOAR gets the answers to commuters' pressing questions.
With inflation riding high, why must fares be raised now?
Fares must be raised for the long-term viability of the public transport operators,so they can continue to make capital investments and provide the quality service expected.
The amount of household income spent on public transport, expressed as a percentage of household income, dipped from 7 per cent in 2003 to 6.2 per cent last year.
In other words, transport fares have remained affordable for most commuters at a time when the unemployment rate is at its lowest in five years.
The PTC said, however, that it was mindful of the prevailing economic conditions and overall cost-of-living issuesthat commuters faced. By raising the transfer rebate this year and making operators absorb the bulk of the cost, thePTC said it had 'struck a balance' between the needs of commuters and the operators.
Fares for nine in 10 journeys will change, ranging from about 7 cents less to 4 cents more, depending on the commuter's travel pattern.
The average bus and rail fares here are still lower than those in Hong Kong,London and New York.
How far do the fare changes affect the transport companies?
The fare-cap formula the PTC uses puts a cap on transport operators' revenue from fares. The cap during this review was at 3 per cent but overall, the transport operators will earn just 0.7 per cent more in fare revenue.
The PTC also checked the transport operators' Return on Total Assets or Rota a measure of how much profit acompany generates for every dollar of assets invested.
The Rota for SBS Transit is 8.6 per cent, and for SMRT, 11.1 per cent. Holding these up to Rotas of other industries,the PTC said it did not think they were 'excessive'.
A check against transport operators such as Hong Kong's Transport International Holdings and MTR, the multinational Stagecoach Group and Singapore Airlines, found them to have Rotas ranging between 2.8 per cent and 10.1 per cent.
By absorbing a larger share of the transfer rebate, the operators here will jointly give up over $30 million in fare revenue.
SBS will earn 0.9 per cent or $5.8 million more in revenue, and SMRT, 0.6 per cent or $4.3 million more.
Why the 10-cent across-the-board increase for those who pay fares in cash?
Cash fares have stayed unchanged since 2005, and the gap between them and those paid by ez-link cards have sincenarrowed.
When the ez-link card was introduced,concessions were given to encourage their use because it costs transport operators more to handle cash fares.
The new distance-based fares are supposed to address the current lopsidedness of making commuters who opt for transfer routes 'cross-subsidise' those who take direct routes. How does this work?
Currently, a commuter who chooses a transfer route to get from Point A to Point B pays more than a commuter who takes a direct route, even for the same distance. The commuter taking the transfer route is thus being unfairly asked to keep the fare for the direct-route commuter lower than it should be.
Eliminating the transfer 'penalty' will correct this imbalance. With the fare review, the transfer rebate was raised from 25 cents to 40 cents. Another 20 cents will be given in the next fare review.
This article was first published in The Straits Times on Sept 13, 2008
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