ELECTRONIC ROAD PRICING

Mr Lew Syn Pau asked the Minister for Communications (a) how much has been spent on implementing the Electronic Road Pricing (ERP) System so far; (b) how much will be the annual operating cost of the system and how it campares to the annual operating cost of the old manual system; and (c) in terms of revenue per month, how much is collected under the ERP system compared to the sale of monthly and daily coupons under the old system.

Mr Cyrille Tan asked the Minister for Communications whether his Ministry will consider lowering the Electronic Road Pricing rates for commercial and industrial vehicles so as to reduce business costs in Singapore.

Mr Chay Wai Chuen asked the Minister for Communications whether his Ministry will consider (i) reducing road taxes or other statutory charges for private and goods vehicles; and (ii) reducing/adjusting the Electronic Road Pricing charges for optimizing traffic flows, in order to reduce business costs for businessmen and individuals.

Mr Mah Bow Tan: Mr Speaker, Sir, may I have your permission to take Question Nos. 11, 12 and 13 together as they are related?

Mr Speaker: Yes.

Mr Mah Bow Tan: Sir, let me first reiterate the objective of the Electronic Road Pricing (ERP) System. It is to keep our roads free-flowing, in order to reduce the overall cost of transporting goods and people. It does so by using price to spread traffic on our roads evenly throughout the day. The purpose of ERP is not to generate more revenue. That is why, as part of the implementation of the ERP, we have reduced the upfront and annual costs of vehicle ownership. Reducing upfront taxes/ERP rebates/Phasing-in ERP charges

To answer Mr Chay, under the new vehicle tax structure that has been implemented since 1st April this year, upfront taxes such as Registration Fees (RF) and Additional Registration Fees (ARF) had been reduced drastically for the majority of vehicles. For example, the RF for heavy goods vehicles was reduced from $14,000 to $140 (99%). The ARF for tourist coaches was reduced from 55% of OMV to 5% of OMV, resulting in savings of about $28,000 per vehicle. In addition, most vehicle owners enjoyed savings from reduction in their annual road tax or diesel tax, ranging from an average of $280 per year for car owners to a few thousand dollars for goods vehicles and buses.

We are also giving ERP rebates to motorists over the next few years, starting with $200 per PCU for the first year of ERP implementation starting 1st September this year. For those motorists who do not need to or decide not to pass through ERP gantries, and these motorists are in the majority, this rebate is a bonus.

To help businesses adjust to the ERP system, we have phased-in the rates for taxis and commercial vehicles over the next four years. Taxis are currently levied one-third while commercial vehicles pay only one-quarter of their respective ERP rates.

The entire package of road tax reduction and ERP rebates, not taking into account revenue from ERP, will save motorists and businesses about $1.5 billion over the next five years.

Cost/revenue of ERP System

Mr Lew asked about the cost of ERP. The development and implementation of the ERP system cost about $213 million. This includes the cost of fitting the In-vehicle Units (IUs) onto 653,000 vehicles during a 10-month long IU fitting exercise.

The annual cost of operating the ERP system is about $9 million. The manual Area Licensing Scheme (ALS) and Road Pricing Scheme (RPS) cost $17 million per year, mainly in manpower cost. While the primary objective of ERP is not cost reduction per se, nevertheless, it is less labour intensive, and therefore more cost-effective in the long run.

In terms of revenue, the Government is collecting less from the ERP than from the old system. In September 1998, revenue collection from ERP was about $6.6 million, which is 23% less than the average monthly revenue of $8.6 million under the old system.

ERP implementation

The implementation of the first phase ERP since 1st September 1998 has led to a significant improvement in traffic conditions within the CBD. Traffic volume entering the Restricted Zone has been reduced by about 24%, while traffic conditions on the ECP and PIE have also remained good. However, on the CTE, traffic congestion has worsened, with average traffic speed falling to 35-50 kph, which is below the optimal level of 50-55 kph. This is primarily due to the substantial increase in the number of taxis and commercial vehicles using the CTE .

To fully realise the benefits of the ERP system, we must ensure that rates are set such that roads and expressways are neither overly congested nor under utilised. If so, then adjustments to the ERP rates will have to be made to achieve better traffic conditions. Over time, traffic conditions will also change. ERP rates must respond accordingly. To make full use of the flexibility of the ERP system, reviews of traffic conditions will be carried out regularly and rates adjusted, if necessary.

LTA has noted that the traffic patterns in the CBD and expressways have stabilised. It is currently reviewing the rates to bring about more optimal use of the roads. Where and when the roads are under-utilised, ERP rates will be lowered. Conversely, where and when the congestion levels are unacceptable, the rates will be adjusted upwards. LTA will finalise the changes in the ERP rates and announce the details soon. Cost-cutting measures

Finally, in response to Mr Cyrille Tan, let me stress that we must not mix the objectives of ERP with that of the cost cutting measures that Government is implementing to help business. With the ERP, we can rely more on usage measures to manage traffic and this will allow us to further reduce upfront taxes like ARF. Indeed, the sooner and the more fully the ERP system is implemented, the more leeway the Government will have to reduce these statutory charges on vehicles, and hence the overall cost of owning vehicles.

But let me end by saying that the greatest contribution of the ERP system really is its ability to keep our roads free-flowing, in an efficient and effective manner. We take our traffic conditions for granted. Yet, many cities around the world are grappling with the problem of congestion and the costs it imposes on their economies and their societies. The ERP system that Singapore has put in place after many years of planning and implementation has been acknowledged and recognised by international traffic management experts and policy makers as an effective and fair way to solve the problem of congestion. So, let me take this opportunity to acknowledge the efforts and the contributions of all those responsible for successfully and smoothly implementing the ERP system, especially the contractors, the media, the staff and all motorists for their understanding and cooperation.

Mr Chiam See Tong (Potong Pasir): The Minister has said that the CTE has become more congested. What is the Government doing about it?

Mr Mah Bow Tan: Sir, we have just spent the last eight years trying to solve the problem of congestion through ERP. I think the CTE problem is a unique one which has to be tackled specifically because the other two expressways are not so congested. LTA will be looking at this in closer detail in terms of the types of vehicles using it and the times they are using it. LTA will then make the necessary adjustments to ERP rates in order to smoothen the flow.

Mr Chiam See Tong: The problem is probably due to too many COEs being released. There are too many cars on the road. That is why you are getting congestion.

Mr Mah Bow Tan: Sir, I am glad to hear the Member talking about car population control as one of the ways to ease congestion on our roads. Because that is precisely what we are doing. We are using the COE system as well as the ERP system to control congestion on our roads. One or the other alone will not do. So ERP alone is not going to solve the problem. COEs plus ERP will solve the problem. I would like to thank the Member for re-emphasising that point. But having said that, the total number of COEs being issued is based on very rough global estimates of how many cars Singapore roads can accommodate. As to where and when these cars travel, I think it is not possible for us to determine how many COEs should be issued for people living in Potong Pasir, for example, because they happen to be congesting the CTE. But I think the ERP will solve the problem of localised congestion, whether it is on the CTE. So if we use both these measures judiciously, COEs to control overall car population and ERP to control localised congestion, I think we will be able, most of the time, to control the congestion problem in Singapore. I say "most of the time" because there will be other situations when there are traffic jams due to accidents, bad weather and so on, which are beyond our control.

Mr Leong Horn Kee (Bishan-Toa Payoh): Sir, I would like to ask the Minister whether he would agree that the ERP system will actually transfer loading of the transportation cost from the non-business sector to the business sector. In the process, actually the cost to the business sector is increased, which in turn is against the current Government's intention to lower overall business cost for the business sector.

Mr Mah Bow Tan: Sir, I dispute that entirely because, as I have indicated, for the bulk of the industry, their transportation costs have actually been lowered. There is a small sector of the business community which depends on very frequent use of ERP-controlled roads which will see an increase in their transportation cost. I think it is inevitable in a situation like this that there will be some businesses which cannot lower their transportation cost, even if they try to change their travel patterns, but these are, I submit, in the minority. The indications are that the bulk of businesses are actually saving and some of them are saving very substantial amounts. So, the question really is: what do we do with the very small percentage of businesses which are affected by this higher business cost? I would say that the first thing that they would have to do is to relook at their business conditions and see whether there is a way for them to reduce cost by making less use of ERP-controlled roads, by changing their travel patterns, by relooking at the total logistics system. But we cannot change the entire system just because a small percentage of the business community is adversely affected. Indeed, the fact that ERP is successfully keeping our traffic flowing smoothly is benefiting the overall business community. If we were to ditch that, how is it going to help Singapore, when roads are heavily congested, when people take inordinate amounts of time to get to work or meetings, when goods are stuck on the way to the port and to the airports or on their way to the factories? I think the cost to Singapore will be much, much higher, especially the cost to business.

Mr Lew Syn Pau (Kreta Ayer-Tanglin): Sir, I understand that since the implementation of the ERP, there is a shortage of taxis in the CBD. For businesses like taxis and courier companies, I do not know whether it is possible for the Minister to impose a certain maximum deduction from the ERP cashcard per day, so that we cap their cost for entering the CBD per day. This would help them to contain their cost.

The second question is that since the ERP started, the ring roads around the CBD like Scotts Road, for example, which is within my constituency, have been really congested during the daytime whereas Orchard Road, which is just around the corner, is empty. It appears to me that actually there is a bit of mispricing problem. Perhaps during the off peak hours and during the day -

Mr Speaker: Order. Mr Lew, what is your question?

Mr Lew Syn Pau: Sir, I would like to ask the Minister to perhaps consider changing the pricing of ERP during off peak hours so that at least the traffic along the ring roads will be evenly spread out.

Mr Mah Bow Tan: As far as pricing is concerned, as I have indicated, LTA is now reviewing the traffic flow in the CBD area as well as along the expressways and, if necessary, adjustments will be made. In so far as capping the maximum amount of ERP rates is concerned, to do that would be defeating the purpose, because the idea of charging per pass is really to let individual motorists who are passing through the gantry take considered decisions as to whether they wish to make that number of trips or not. As I indicated earlier, there will be some businesses including taxis which will be making multiple passes. But for taxis, if they pass through with a passenger, the passenger is the one who is paying. And to help ease in the implementation, we have kept the rates to one-third. So they are actually paying one-third what the car should be paying.

As for the times when they go in without a passenger, I think this is for the taxi drivers and the taxi companies to decide how they wish to resolve the problem, because since 1st September fares have been deregulated and they are now free to reconfigure the tariff structure to resolve this problem.