DEREGULATION OF TAXI FARES

[Mr Speaker in the Chair]

Mr Yeo Guat Kwang asked the Minister for Communications and Information Technology, with the deregulation of taxi fares, (a) how the consumer will be protected; (b) how the taxi fare increases will be distributed; and (c) how much of each dollar of taxi fare goes to the taxi company, the various taxes (Certificate of Entitlement, import tax, registration fee, Electronic Road Pricing charges, etc), diesel and the driver.

Mr J B Jeyaretnam asked the Minister for Communications and Information Technology whether the proposed increase in taxi fares has been made solely at the request of the companies that operate the taxi services or because the taxi drivers themselves have been complaining that they are not earning enough from the present fares.

The Minister for Communications and Information Technology (Mr Yeo Cheow Tong): Sir, may I have your permission to take Question Nos. 1 and 2 together?

Mr Speaker: Yes.

Mr Yeo Cheow Tong: Sir, Members of this House will recall that the Public Transport Council (PTC) deregulated taxi fares in September 1998. This means that taxi companies now have autonomy to set taxi fares without needing to seek approval from the PTC. They now have more flexibility to introduce differentiated and niche services and to respond more quickly to changes in the environment through differential pricing strategies. The aim was to allow the forces of demand and supply to determine the pricing of taxi services that would optimise the utilisation of the taxi fleet. With deregulation, taxi companies have to consider carefully and individually decide on fare revisions based on their pricing strategy and supply-demand considerations.

Taxi companies have to price their services at a fair level, taking into consideration, among other factors, the demand for their services, cost of providing the services, earnings of taxi drivers, competition from other taxi companies and other modes of transport, the need to generate adequate returns to pay for vehicle replacement, and to invest in expansion and upgrading. Commuters are in the best position to decide whether taxi fares are set too high or too low. If taxi fares are set too high, the demand will drop and taxi companies will not be able to operate their business profitably. Conversely, if fares are set too low, supply will not be able to match demand and service standards will drop.

The deregulation of taxi fares therefore serves to optimise the utilisation of resources in meeting the demand for taxi services. Commuters stand to gain as it ensures that the pricing of taxi services is competitive.

With fare deregulation, how each dollar of the taxi fare is distributed is determined by the taxi companies. We can expect that, to retain drivers in this highly competitive and tight labour market, taxi companies will have to enable their drivers to earn a decent income.