BUANGKOK STATION

Mr Charles Chong asked the Minister for Transport (a) if he will give (i) the reasons for allowing the operator of the Northeast Line (NEL) not to open Buangkok Station, (ii) the rationale for allowing the same operator to run both the bus and train services in the same area without competition, and (iii) the approximate cost (including depreciation) of keeping the Buangkok Station closed compared to the cost of operating the Station; and (b) whether a study has been done to ascertain if SBS Transit can operate the NEL viably without raising fares and closing down more stations.

Mr Yeo Cheow Tong: Sir, the Land Transport Authority (LTA) had agreed to the request from SBS Transit to defer the opening of Buangkok Station because there is currently no development in the immediate vicinity of the station. Although some residents may be willing to walk a longer distance to use Buangkok Station, the critical consideration is that the number who is willing to do so on a daily basis must be high enough. Since Buangkok Station has not been opened, LTA has ensured that residents in the area are adequately served by buses. They can also access the North East Line (NEL) by taking feeder buses to the two nearby stations of Sengkang and Hougang.

The operator for NEL was selected through a competitive tender. SBS Transit won the competitive tender in 1999 based on the merits of its technical proposal. There are advantages to having the same operator run both bus and train services. For one, it allows the operator to better integrate both the bus and train services for the benefit of commuters. Feeder bus routes can be better planned, and the first and last bus and train schedules can be better coordinated. Re-routing and bringing on of additional bus services in the event of a breakdown in train services can also be better managed.

Even though SBS Transit operates both the buses and the train along the North East corridor, it does not have a free hand in deciding on the bus rationalisation package. It had to submit its proposal to the Public Transport Council (PTC) for approval. The PTC considered the overall operational efficiency of the transport network, as well as the impact on commuters. This process is the same, whether or not the operator of the train is also the operator of the buses in the area.

Mr Chong asked about the cost of keeping Buangkok Station closed. The annual depreciation charge on Buangkok Station is about $3 million. This is incurred regardless of whether it is open or not. However, if the station is opened, the operator will incur an additional operating loss of about $1 million annually.

Mr Chong also asked if a study has been done to ascertain if SBS Transit can operate the NEL viably without raising fares and closing down more stations. Let me assure the Member that SBS Transit would not be allowed to close any other stations on the NEL. Unlike Woodleigh and Buangkok stations, all the other NEL stations are essential for serving the developments around them.

Before the Government decided to proceed with the construction of NEL, LTA had conducted extensive feasibility studies to ascertain that the line would be both economically and financially viable over the medium to long term. Although the NEL is incurring operating deficits in the initial years, the prospects over the long term are positive as more developments are completed in the north-eastern parts of the island.

Mr Charles Chong: Mr Speaker, Sir, could the Minister tell us whether PTC was aware that Buangkok Station would be closed before it approved the fare structure by the operator?

Mr Yeo Cheow Tong: Sir, unfortunately SBS failed to inform PTC of this fact.

Mr Charles Chong: Would PTC now review the fares in view of the knowledge that Buangkok Station is now closed?

Mr Yeo Cheow Tong: Sir, the fact that Buangkok Station is closed makes no difference to the fares. Because if PTC's job is to ensure the viability of the operator, then it should be increasing the fares. So, as it is now, the NEL is incurring a fairly large deficit. By closing Buangkok Station, it has made the deficit a little bit smaller. That is all. It does not make the line any more viable.

Dr Michael Lim Chun Leng: Can the Minister clarify the process so that we will be a bit more enlightened? I would have thought that when SBS was given the commercial right to operate the NEL and they had gone before PTC to get approval for the set of fares, those fares were approved on the basis that the NEL operator would only close the Woodleigh Station. So, I am just wondering, in terms of the principle, whether it is proper, having had the set of fares approved on the basis of the closure of one station, to close subsequent stations. That is my first question.

The second question is this. The MPs had heard some rumours about the closure of Buangkok Station and we had written to SBS to seek confirmation in late March only to get a reply that Buangkok Station would be opened. And to our aghast and horror, we were informed that Buangkok Station was not going to be opened just a few days before the opening. Was there any reason why SBS could not have informed the MPs earlier that the station was not going to be opened? Obviously, if there were rumours on the ground that this was not going to be so, they might have known even at the point of time when they called the MPs down for a briefing on the NEL stations. So, why did they not let us know at that point in time?

Mr Yeo Cheow Tong: Sir, the PTC approved the fares on the basis of what SBS had submitted to the PTC. In actual fact, SBS had submitted a request for much higher fares which the PTC felt should be reduced, because PTC wanted to ensure that the fare premium on the NEL was kept to a reasonable limit of not more than 25 cents. Yes, SBS should have gone back to PTC to inform PTC that it had decided not to open Buangkok Station and that LTA, as a regulator, had approved its application to keep Buangkok Station closed.

Should they now go back to PTC? I do not think it would serve much purpose at the present moment. Because, as I said, the NEL is already not viable in terms of the current operating expenses and revenues. They are losing money and incurring a deficit. I do not think that PTC would make any changes to the fares because of that $1 million reduction in its losses. So, it is a moot point as to whether it makes any difference if SBS had gone back to PTC.

The second point is about SBS having informed the grassroots leaders that Buangkok Station was going to be opened and subsequently not informing them about a change of plans. Sir, I agree with Dr Michael Lim that having informed the Adviser and the grassroots that Buangkok Station was going to be opened, SBS should have gone back to them early to inform them that there had been a change of plans. We had, in fact, told SBS that what they did was wrong and they should not do such a thing again in the future.

Dr Michael Lim Chun Leng: Mr Speaker, Sir, I am getting a bit confused here. I am trying to understand the process. Can I check with the Minister? Does it mean that an operator can seek approval from PTC and PTC, based on a certain set of criteria, has approved the routes or what they are supposed to do, and then the operator can decide not to follow what PTC has agreed upon? Then, I am a bit confused about the whole decision process. Does it mean that the operator can seek PTC's approval of routes and then after that disregard PTC's decision? If that is so, under what circumstances can they do that?

Mr Yeo Cheow Tong: Sir, for the bus system, PTC is responsible for both the routes and the fares. For the train, it is a little bit more complicated. For the train, the opening of stations is under the control of the regulator which, in this case, is LTA. PTC is only responsible for the fares that are to be established for travel along the NEL system. And that is why I think there was a bit of confusion there. I understand that SBS thought that since LTA had approved the application not to open Buangkok Station, that was the end of it. So there was some genuine confusion on the part of SBS as to whether or not they needed to go back to PTC, which is why, as it turned out, they proceeded on the basis of obtaining approval of LTA, and did not go back to PTC to inform PTC that there was a change in the number of stations that were to be opened.

Mr Tan Soo Khoon: Mr Speaker, Sir, there is one thing I do not understand. If the NEL is not viable to be operated in spite of the high prices, why is SBS operating the line? Why did they tender for the line? And why did the Government award this operation to SBS in the first place?

Secondly, with the benefit of hindsight now, would it not have been better off if the NEL had been operated by SMRT which would then be able to enjoy better economies of scale which it now has, and thereby resulting in a better pricing structure for all commuters?

Mr Yeo Cheow Tong: Sir, as I mentioned in my initial answer, the NEL is viable over the medium to long term. Today, it is running a deficit because the developments in the north-eastern part have been a lot slower than originally projected when the decision was made to proceed with NEL. As explained by Minister Mah, because of the slowdown in demand for flats, the building programmes for Sengkang and Punggol have had to be scaled back quite significantly. In fact anyone who visits Punggol and Sengkang will see huge plots of land that have been cleared obviously for very quick startup of building but which has had to be held back because of the slowdown in demand. So, if the demand had taken place or had developed as originally anticipated in the early 1990s, then the NEL would have been viable fairly quickly.

As to why SBS took on the job of running NEL, obviously it took on the job because it was looking more at the medium to long term. In the initial stages, it may have run a loss as with any new system, but over the long term it is going to be profitable.

On hindsight, should we have allowed for only one operator instead of two? Sir, when the policy was made to introduce a second operator, it was felt that it would give us a chance to compare the two operators and from the two separate operations, perhaps to be able to get ideas on where improvements can be made to the operations. This way, whilst they were not competing directly in terms of serving the same area, they could compete in terms of how to better manage each of their lines, and from the competition we could then perhaps share the lessons learned. I think that philosophy is still valid. Now that we have two listed companies running the two lines, we leave it to the two companies to decide as to whether it should be operated by one or two companies.

Mr Inderjit Singh (Ang Mo Kio): Sir, can the Minister confirm this? The issue is that in the short term it is not viable, but in the long term it is. I can see that in any investment, it takes time to pay back. With that in mind, should we not try to compel SBS to look at the longer term gain that they are going to get and, therefore, subsidise all the bus routes, the Buangkok Station and so on? In fact, the Government has already written off billions of dollars on this line. Why can we not write off a few hundred million dollars and subsidise SBS, since we have already subsidised them on this operation, and solve the problem that the residents are facing?

Mr Yeo Cheow Tong: I think we have to collect the money from Mr Inderjit Singh. Just because we have already built the system and it is a sunk cost, it does not mean that the Government should now put more money, sink more money in and throw more money away. SBS has taken on the job of running the NEL. Yes, they are going to be making losses. Yes, they have to cross-subsidise the losses from the more profitable operations, which are really the bus and the taxi operations. Should we subsidise them? The answer is no. They came in on a willing basis. They had done their calculations. They may have made a bit of a mistake in computing how much they are going to lose, but it is something they have to live with as a listed company.

Mr Speaker: Mr Loh, you have got 1 minute.

Mr Loh Meng See (Jalan Besar): Just a quick question. I just want to have some sense of the scale we are talking about. Arising from all these, how many new commuters are there for the North East Line and how many people are we talking about that are affected, and how many buses, on an overall basis, have been withdrawn from our roads?

Mr Yeo Cheow Tong: The NEL ridership today is about 160,000 on the average. That means we have moved 160,000 people from largely buses to the NEL. How many buses have been removed from the roads? From the statistics, about a total of 150 buses had been saved. Has that made the overall operation more economic? I think, yes. The fact that they are able to save 150 buses means that they have been able to keep the deficit within control. If they are to duplicate both the NEL system and keep the bus routes, then I think the deficit would have been much, much greater. 3.00 pm

Mr Speaker: Order. End of Question time.

[Pursuant to Standing Order No. 21(3), Question Nos. 11 to 19 have been postponed to the sitting of Parliament on 15th August, 2003.]