BUS AND MRT FARE INCREASES

Mr J. B. Jeyaretnam asked the Minister for Communications and Information Technology whether he will explain the justification for the increase in bus and MRT fares.

The Minister of State for Communications and Information Technology (Dr John Chen Seow Phun) (for the Minister for Communications and Information Technology): Sir, the Public Transport Council met in April to consider the proposals by the public transport operators to increase the fares for bus and train services. On 20th April, the Chairman of the Public Transport Council announced the new fares that would take effect from 1st June.

When reviewing fare proposals, the Public Transport Council has to take into consideration improvements in service quality, rising costs and the need to balance these against consumer affordability and the long-term financial viability of the transport operators. In approving this round of fare increases, the Council has explained that its approval was based on these considerations that I have just mentioned.

The Council has also explained that the increase in feeder fares is intended to ameliorate in some measure the pricing anomaly of feeder fares compared to minimum trunk fares. At present, the feeder fares are much lower than the trunk fares, even though they consume the same level of resources. This results in commuters often pressing for feeder services even though they have trunk services plying the same route. The fare adjustment will reflect the cost of operations more accurately, and incentivise operators to provide a better feeder network to serve residents better.

The increase in fares for commuters travelling longer distances will make the fare structure more equitable by requiring long distance commuters to bear a fairer share of the costs. Today, short distance commuters are cross-subsidising longer distance commuters.

In approving the fare revision, the Public Transport Council has moderated the fare proposals of the operators to keep the increase at a modest level. The operators have projected that based on what the Council approved, their fare revenue will only increase by 2.4% or less. This is a modest increase, considering that fares have not been adjusted since 1997.

It is best that operators regularly review public transport fares so that any fare increase is in small steps. This approach is less painful than holding back fare increases until cost pressures become intolerable and the public is then faced with a massive increase in one exercise. Operators are aware that any fare increase is capped by a formula pegged to the cost of living, ie, at CPI + x%, where x is an adjustment factor for cost of operations such as wage changes and productivity gains. Based on this formula, if PTC had allowed fares to increase up to the cap every year from 1997, the fares would have increased by a total of 8.3% after this year's fare revision, compared to the level in 1997.

The Public Transport Council has exercised due diligence in carrying out its duty to scrutinise the proposals of public transport operators and in approving the latest round of increases. I am of the view that the increases are reasonable and justifiable, in view of the reasons given by the Council.

Mr Jeyaretnam: Sir, the Minister of State has given long reasons for what he thinks are the justification for the increases. May I refer him to the statement that appeared in the press sometime ago? May I ask the Minister of State what inquiries had he made before he made that public statement saying that the increases were just and fair?

Dr John Chen Seow Phun: Sir, the comment that I made regarding increases was made after the PTC's announcement of its approval. Of course, the Ministry had to scrutinise what the PTC had deliberated on and whether it is indeed fair. Our view is that the PTC has done its duty and has looked in a very detailed manner into all the factors before coming to this conclusion.

Mr Jeyaretnam: Sir, does the Minister of State remember that in his statement he said that the drivers had suffered pay cuts during the recession, and it was only fair that they should now have their salaries increased, or words to that effect? May I ask the Minister of State whether he looked into the accounts of the bus companies during the recession to see whether their profits had gone down a substantial level that required the salaries to be cut, if they were indeed cut? Had he made those inquiries?

Dr John Chen Seow Phun: Sir, the PTC took into consideration many factors. Inflation was one factor. The investments that the companies put in for service improvements was another factor. Productivity gains was another factor. The possibility of wage increases was another factor. All these were considered by the PTC when they deliberated on these proposals. Therefore, as far as wage increase is concerned, if they do not have an increase in revenue, it would be very difficult for the company to consider a wage increase.

Mr Jeyaretnam: Sir, I am afraid the Minister has not answered my question. May I ask him, finally, whether he has looked at annual statements to see what profits these bus companies have made over the last few years and whether they have been decreasing or whether they have been increasing every year? Has he looked at the accounts?

Dr John Chen Seow Phun: Yes, the PTC has looked into all these factors.

Mr Jeyaretnam: Has the Minister of State looked at it?

Dr John Chen Seow Phun: I am aware of the situation and I am of the view that the returns are reasonable. If you look at the return on assets of the bus companies, you will be surprised that it is quite low. And even if they put the assets into bonds, I am sure, without the hassle of all these bus operations, it would give them a better return.

Mr Simon Tay (Nominated Member): Sir, may I ask the Minister of State about the timing of the increases? He mentioned that the last review was in 1997 before the crisis started. Given that the crisis started in 1999 and the crisis seems to be over, do these increases signal that public transport as a whole is expected to go up as the economy goes up?

Dr John Chen Seow Phun: Sir, as MCIT is overseeing the transport sector, so I speak for the transport sector. If we look at the inflation figures since 1997, although we have been through the recession, there is still inflation. And if we look at investments in buses, TIBS, for instance, has spent $100 million in acquiring 300 new buses and it is going to expand its fleet by 30% this year. SBS is going to buy more superbuses and have a system using technology to improve fleet management and so on. All these are reasons for a revenue increase. If we do not allow fare increases, then what it means is that profitability and viability are going to go down, and there will be no incentive to improve the system.

Mr Jeyaretnam: Sir, may I ask the Minister of State, finally, is he saying then that these increases were made to enable the returns for the shareholders to be satisfactory? Is that the reason?

Dr John Chen Seow Phun: Sir, may I remind the Member that Parliament passed the Public Transport Council Act, and the objective of the Act is to balance the interest of both the operators and the commuters. And we have debated this at length in this House. If we are to balance the interest of both, then we must make sure that it is, in the end, a win-win situation for both. If we say that bus operators cannot increase fares, then in the end, it may become a lose-lose situation.