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Public transport fare hike : The fare increase formula

Posted by theonlinecitizen on August 2, 2007

By Leong Sze Hian

The Public Transport Council says that it will be imposing fines on transport operators if they fail to meet certain standards of service.

These fines, as reported by channelnewsasia here, can be “$100 (per day per bus service) and $10,000 (per month per standard)”.

The PTC has also declared fines for such failures last August.

Imposing fines on public transport operators may result in additional costs of meeting new service standards and the fines eventually passed on to commuters.

A more effective deterrent

A more effective deterrent to ensure high service standards may be to peg some element of failure to meet service standards to the formula for fare adjustment.

For example, service standard lapses may be equated to a slight drop in percentage from the 50 per cent wage increase and inflation in the fare adjustment formula, (see here) or a reduction in the maximum 1.7 per cent fare increase allowed.

With the recent increase in taxi fares, more people may take buses and the MRT. Consequently, revenue and profits of operators of the MRT and buses may rise. Therefore, I suggest that more time be given to assess the impact of the taxi fare increase before the Public Transport Council makes a decision on the bus and train fare increase application.

The main reason given for the fare increase is the rising cost of diesel. Why not consider reducing the tax on diesel, so the benefit can be passed on to commuters?

The lower income vs the higher income

The fare adjustment formula is pegged to the change in average wages and inflation (consumer price index or CPI).

It is the lower-income group that has no choice but to use public transport. Therefore, I suggest some adjustments be considered to take into account declining wages and relatively high inflation of the lower-income group.

Although workers were paid 4.3 per cent more last year, household incomes in the 11th to 20th percentile fell by 4.3 per cent a year from 2000 to 2005.

The incomes of the 21st to 30th percentile dropped by 0.5 per cent and the 31st 40th percentile rose by just 0.3 per cent. As to inflation, the lowest 20 per cent income group’s CPI rose by 1.6 per cent a year, compared to a decline of 0.6 per cent in the highest 20 per cent income group.

In 2005, these two groups’ inflation was 1.3 and -0.1 per cent respectively. The CPI increase in the lowest 20 per cent group was the highest among all income groups.

If this trend of declining wages and higher inflation continues, the current formula may hit the lower income group most in the future.

Reflecting the CPI & wage changes

As there were about 420,000 cars (390,000 private plus 30,000 others) in 2004, according to the Land Transport Authority website, rather than just take the CPI and wage increase of the entire population, more weight should be given to reflect the CPI and wage change of those who have to use public transport.

The rising profits of the transport operators, which I understand has been the case after the previous two fare hikes, should also be taken into account in the formula.

In the final analysis, perhaps the ultimate measure of whether the formula is fair is whether transport operators’ profits continue to rise.

The buses and MRT are essentially a monopoly as there is no duplication of routes.

The fare adjustment formula enables operators to keep increasing fares and profits, because rarely has there ever been a year when both average wages and inflation have declined.

Interesting Note: On the same day that the transport companies revealed to the media that they have applied for fare increases, the government also announced that it is setting aside $10 million dollars to help the needy.

Does this mean that the fare hike is a foregone conclusion – even before the Public Transport Council deliberates and decides whether to approve the fare hike?

*See screenshot below for channelnewsasia’s report (click to enlarge):

Read also:“Fare hike for public transport in October?”


5 Responses to “Public transport fare hike : The fare increase formula”

  1. Ned Stark said

    Not only the low income. From what i have heard there are some professionals who are preparing to downgrade and get rid of their cars.

    Anyway one of my friend’s raised an interesting point. He believed that being low income was not so bad as there would be schemes to help the low income (granted its not much but then some would contend that something is better than nothing). Those who are in the middle or low middle arent very lucky.

  2. So many times, so many citizens have written well-articulated letters to the forum page of the Straits Times pointing out wrong policies which seek to tax citizens with direct as well as indirect taxes and fee increases of all kinds even in situation where the ministries or the GLCs are not losing monies with lots of profits declared last seasons.
    In fact, the high costs of living and doing business is mainly caused by a system where government double-charges on lands and facilities which were already paid for by citizens through the taxes e.g. HDB acquired lands using people’s monies to do so yet it charges flats at market prices less a discount wrongfully and dishonestly claimed by Mah Bow Tan as subsidy. (Today he still avoids replying to letters to forum page by an ex-HDB staff Mr. Cheong Chee Mun on this wrongful practice or profiteering which causes costs of living and doing business to go up and up)

    It looks like PTC of SBS or some councils of some GLCs are going to jack up fees again and again this year going by past occurrences.

    Has the government listened to voice of reason. Has it claimed to govern by law and order.

    If the government is not so self-centred or hypocritical many citizens’ problems could have been solved today.

    So citizens are now left wondering whether it is useful for them to express any more opinions or whether the forum page of the Straits Times and the Straits Times should close down or change name as Feedback Unit has done as it is becoming a national shame to publish news or give feedbacks without any listening by the very government which talks proudly to the world about their cosmopolitan openness and welcoming of talents, views of rightness or opinions.

  3. Lesile said

    Transport Hike Formula = OppressionLevel + ChoicelessLevel + Minister’s Package + MoralAuthorityRate.

    ‘Strait Times’ might want to rename to reflect their honest standing. What not just rename to ‘PAP Times’ because PAP stand for integrity, honesty and democratic ! In this way those newspapers will definitely be read by many leaders of the world because what other countries’ need is a dose of money-loving and oppressive government.

  4. cs said

    Speaking about foreign talents, they are having trouble too..
    GST up…
    Utility Bill up up…
    Transport fares up up up…
    Rental goes up up up up up…

  5. Cs2 said

    CPI means cost of living rite?
    Sigh! We need to present this statistics properly in layman terms to these lower percentile group. They are at the most disadvantaged group caused by govt policies, yet they dont understand what is happening to them and consistently vote for policies. Another problem is they fear govt backlash if they go against a powerful authority as they have little power. I see it as the same way a servant tries to appease the emperor in hopes for favors. So is that $10million could be PAP’s way of reinforcing that kind of mentality… rather than ‘helping the poor’.
    In my personal opinion, democracy has given these lower income people the power to decide for their future with the ‘one man one vote’ but fear of PAP has caused them to vote for the status-quo. A parallel i can draw is North Korea (i know, its extreme). The people cheer their leader not because he is a good leader, but because he wields a significant political power to the point of life and death. And here in Singapore, Money is Power. Power to make rich or make bankrupt. My two cents!

    PS i fear govt surveillance of this article for it feels like there is a political police in Singapore. Yet i need to say what i need to say or i go crazy ruminating on it.

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