Home > Singapore
Onwards To a New Fare Formula for Public Transport
Craving a change of environment, Ms Khatijah Aboo Bakar joined Go-Ahead last August, after more than two decades with SBS Transit. | PHOTO: TODAY file photo
January 3rd, 2017 | 08:01 AM | 659 views
Change swept through the public transport sector last year, with Tower Transit and Go-Ahead Singapore launching bus services under the government contracting model and SMRT’s switchover to the new rail financing framework signalling a new landscape that places commuter interests front and centre.
With the new system of government ownership of infrastructure and assets for rail and buses, operators are relieved of the financial burden of capacity expansion, replacement and upgrading, ensuring that profitability will no longer get in the way of timely responses to ridership trends.
But one part remains to be settled: How will public transport fares be set from here on? More broadly speaking, how will the Government strike a balance between keeping fares affordable and keeping aside enough resources for maintenance and upgrades?
With the formula to set fares due to expire at the end of this year, National University of Singapore transport researcher Lee Der-Horng said: “The Government needs to make a judgement call ... On the commuter’s side, it’s always ‘the cheaper the better’. But it’s not going to be this way. Good service must come with a price.”
Using taxpayers’ money to finance the public transport system has its implications, Prof Lee noted. “You will always hear some voices saying, ‘I’m a taxpayer but I don’t take the bus’.”
FINDING A NEW BALANCE
Traditionally, fare review exercises are a chance for public transport operators to recoup their operating costs. In the most recent exercise, bus and train fares were slashed by 4.2 per cent last December, and will be cut by another 1.5 per cent at the end of this year, due to falling energy prices.
Under the new government contracting model, the Land Transport Authority pays public transport operators a fixed sum to run a package of routes, and collects all fare revenue.
That means recovery of expenses from fare revenue will no longer be relevant, said UniSIM urban transport expert Park Byung Joon. Instead, the objective will be to serve commuters’ interests, entailing spending more taxpayers’ money “to subsidise not the operator but the commuter”, he added.
UniSIM economist Walter Theseira said: “It becomes a question of whether the best way to pay for the public transport system is through the fare box or the tax dollar. There is no magic source of funding for the public transport system. If fares are high, more resources come from the commuter, and if fares are low, the burden on the taxpayer is higher.”
Last January, the Public Transport Council (PTC) said that the review will factor in the transition to the government contracting model, as well as changes to the cost environment and operating structure of public transport operators. A key consideration in the review would be the affordability of fares, PTC chairman Richard Magnus had assured.
At present, the fare formula factors in changes to the Core Consumer Price Index, the Wage Index and the Energy Index over the preceding year. A peeve that critics have had with it is the use of dated statistics — given the time needed for data to be available — to compute fares. “Perhaps at the operation level, we should try to minimise the time lag,” said Prof Lee.
While the current formula allows fares to keep pace with changes to operating costs, it fails to factor in the evolving cost structure of public transport, added Dr Theseira.
“More generally, the present formula discourages expenditures that might alter the cost structure, even if these expenditures are important,” he said, citing raising service quality and improving maintenance as examples that matter to commuters.
A longstanding complaint from operators is that fares do not adequately account for funds needed for asset replacement in the long run, noted Assistant Professor Terence Fan, who specialises in transport at Singapore Management University.
And the demand for better-quality service has driven up costs in recent years, Dr Theseira said. To minimise overcrowding and waiting time, more buses have been put on the roads, while maintenance budgets have increased to reduce the likelihood of breakdowns.
“For buses, the Government now has complete financial responsibility for operating costs. A change in fares directly affects whether the Government generates a surplus or incurs a loss on bus operations,” said Dr Theseira. “For rail, the situation is more complex. For SMRT lines, there is an element of fare risk-sharing, for example. But the general trend is for the Government to assume more and more financial operating risk, in order to provide high-quality service.”
It would be easy to choose the politically popular option to increase subsidies to artificially keep fares low, said Dr Park. “However, it is also a guaranteed way to lose control of the amount of subsidy,” he warned.
Pointing to Seoul’s bus reform, Dr Park said that bus fares have remained largely the same since 2003, although the operating subsidy paid to bus companies has grown fourfold.
Dr Theseira suggested that the new fare formula could build in “long-run costs”, such as capital replacement reserves and cost structure changes resulting from improved service quality and technological progress. The formula should also make clear the proportion of these costs borne by commuter fare and taxpayers, he added.
He explained: “Such a formula might state that, for example, the full cost of a ride is S$5 but that the current subsidy level is, say, 60 per cent, so the fare paid is S$2. Those are just made-up numbers, but in most public transit systems the taxpayer bears a significant share of costs.”
Apart from the impact on fares, the government contracting model has seen foreign operators Tower Transit and Go-Ahead Singapore enter Singapore’s public transport sector.
Already, they have brought a fresh perspective to a job long shunned by locals due to its long hours and complexity. Their presence has also increased the competition for bus drivers, thereby improving the drivers’ lot.
London-based Tower Transit, which won the tender for the Bulim bus package, offered junior drivers a basic monthly pay of S$1,930 as it started operations last May. Its competitors sought to match this in the months ahead, with SBS Transit (SBST), UK-based Go-Ahead, and SMRT raising their starting pay to S$1,950.
However, the operators are unlikely to raise wages further after hiring sufficient drivers, given that wage costs were factored into their bids and any increment would hurt profitability, Dr Theseira said.
Dr Park held a different opinion, believing that the wage increment was due to a demand for higher service standards under the government contracting model. “It means the industry as a whole needs more bus drivers ... as such, the compensation level appears to have gone up,” he said.
For now, bus captains have reaped the benefits of the injection of competition in the market. SMRT chief bus captain Koh Soon Teck, 49, who has 14 years of experience, said in Mandarin: “It’s good to have more competition. The bus driver’s driving skills and salary will be raised.”
Craving a change of environment, Ms Khatijah Aboo Bakar joined Go-Ahead last August, after more than two decades with SBST. In her new role, she has had the chance to mentor newcomers, on top of her driving duties.
Tower Transit’s Tan Kok Peng, who used to drive for the now-defunct Trans-Island Bus Services and SBST, felt that his new superiors were more responsive to feedback — break times have been lengthened, as drivers had requested, for instance.
With the shakeup, even a younger generation of locals are taking to the profession, such as SMRT’s Chio Yeow Chong, 28. “My friends were quite shocked (to hear that I wanted to drive a bus),” he said. But the job is stable, and the incentives and bonuses have their appeal, he added.
SBST bus captain Tay Wee Chye, 27, added: “It’s not as bad as people think. Some people might think it’s a blue-collar job ... Before, people might say ‘you didn’t study, you’ve got no (other) job, that’s why you drive a bus’. Now, people treat you more professionally. You operate a bus, not just drive a bus.”
courtesy of TODAY
by Valerie Koh
If you have any stories or news that you would like to share with the global online community, please feel free to share it with us by contacting us directly at [email protected]