PUBLIC TRANSPORT FARE HIKES

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PUBLIC TRANSPORT FARE HIKES: 4.

Ms Indranee Rajah asked the Minister for Transport whether there is any justification for transport companies to consider raising transport fares at this time.

5.

Mdm Ho Geok Choo asked the Minister for Transport (a) if he will provide an update on the considerations made when deciding on public transportation fare hikes; and (b) whether there are guidelines to ensure affordability of public transportation, particularly with lower-income earners.

The Minister for Transport (Mr Yeo Cheow Tong): Sir, may I take Question Nos. 4 and 5 together?

Mr Speaker: Yes.

Mr Yeo Cheow Tong: Thank you, Sir. Ms Indranee Rajah asked whether there is any justification for transport companies to consider raising transport fares at this point in time. This is a matter that is now being considered by the Public Transport Council (PTC). As Members are aware, PTC is an independent body comprising representatives from different sectors of society.

In assessing the fare review applications, the PTC will have to balance the need for fares to remain affordable while ensuring that the operators can continue to remain viable. I would like to assure Members that the PTC will scrutinise the applications very carefully before coming to a decision.

Mdm Ho Geok Choo asked for an update on the considerations made when

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considering fare increases. Sir, the PTC will be adopting the recommendations made by the GPC-led Committee on the Fare Review Mechanism, which was adopted by the Government earlier this year. The Committee recommended that fare adjustments for each year be capped by the new fare adjustment formula, which is Price Index minus 0.3%. This formula allows the public transport operators to offset increases in their operating costs. It also ensures that commuter interests are protected by allowing them to share in the productivity gains achieved by the public transport operators.

Notwithstanding the formula, the public transport operators are required to explain in detail the rationale for their applications and to support them with cost justifications. The PTC will then scrutinise the reported cost increases to determine if they are truly justifiable. Any fare increase is subject to a cap determined by the formula, which works out to 2.4% this year. This means that even if the operators' costs have increased by more than 2.4%, the maximum increase that they will receive will only be 2.4%. In making its decision, the PTC will also take into consideration other factors, such as the prevailing economic conditions, affordability and the financial performance of the public transport operators. Only after examining all these factors will the PTC decide on whether to grant an increase and the quantum of the increase.

With regard to Mdm Ho's question on the guidelines on affordability, I would like to inform her that the new mechanism requires the PTC to take into account the affordability of public transport to the average public transport user. Affordability will be monitored using the percentage of household income spent on public transport by a typical family. This figure will be tracked on an annual basis using fare and wage movements, and validated

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against the Household Expenditure Survey conducted by the Department of Statistics once every five years.

While this will ensure that public transport will remain affordable to the vast majority of the population, I agree with Mdm Ho that any increase, no matter how small, will still affect the needy and the low-income earners. In fact, they face some difficulty coping with any increase in the cost of living. This would include not just transport costs, but also basic necessities like food, housing and utilities. But we cannot hold back fare increases that are justified, just as we cannot hold back increases in food or utilities prices if the global price of fuel and food goes up. The Government will continue to help this group through the many financial assistance schemes provided by MCYS, the CDCs, the VWOs, as well as the newly established ComCare Fund.

Sir, the PTC is still assessing the PTOs' applications and will take all relevant factors into consideration before coming to a decision. As this is a tedious process involving careful scrutiny of the operators' applications and justifications, the PTC will take at least four weeks to complete its review and is expected to announce its decision in June.

Mdm Ho Geok Choo (West Coast): Sir, in the event that there should be a fare hike and there has been talk that consideration will be given to low-income earners in the form of a concession to help them, I would like to ask the Minister whether there would be some checks made to ensure that the concession given will be offset equally against the increase in the fare hike.

Mr Yeo Cheow Tong: Sir, we have mechanisms in place to help the needy. Those who are facing financial problems can always appeal to the CDCs for

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financial assistance. And we also had the Tansport Fund to which the transport operators contributed. I am sure, as they have indicated, they will be making further contributions to the Transport Fund, which can be used to provide additional support to the needy.

Ms Indranee Rajah (Tanjong Pagar: ): Sir, I think we would accept that there is no timing which is a good timing for raising transport fares. However, our public transport companies appear to have made unfortunate timing and elevated it to an art form, because they have announced their application at a time when they also announced quite large profits. I think the question the public has in mind is: where our transport companies are doing well, can they not use some of these profits to subsidise their operating cost? And is that something that the Public Transport Council will bear in mind?

Mr Yeo Cheow Tong: Sir, I do not think any public company is in the business of subsidising consumers. But what they are required to do is to make sure that measures are in place to ensure that they are efficient, they are providing a good level of services and that the fares that they are charging are reasonable. In fact, the fares in Singapore have been very reasonable. For example, the fares over the past 17 years have gone up by no more than 30-odd per cent, whereas labour costs have gone up by more than 130%. So I think the transport operators have been making all kinds of efforts to ensure that they are efficient and to continue to do so.

Having said that, PTC will definitely be looking at the profitability of the operators, because that is part of the condition that is included in the Report set out by the Fare Review Committee earlier this year. So they will have to look at the Return on Total Assets, and to make sure that that return is not excessive.

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Mr Tan Soo Khoon (East Coast): Sir, I am glad that the Minister has remembered that in 2002 when the House debated on the question of public transport fare increases, we came to the conclusion that PTC should always be mindful that in considering future price increases, it should take into consideration the affordability of commuters as well as the viability of the transport operators. Can I ask the Minister whether the viability of the transport operators is under threat if they do not get the price increase that they are asking for this time, taking into consideration the fact that the transport operators have in fact been having bigger and bigger profits every year after the last price increase in 2002?

Secondly, one of the reasons which the transport operators have given recently for their request for price increase is that the price of oil has been going up. In view of the fact that the world price of oil has come down since last week - it is now about US$48 per barrel, coming down from its peak - is this argument valid any more?

Mr Yeo Cheow Tong: Sir, as to whether the profits are excessive or whether the companies will be non-viable, that is something which the PTC will look into, and I am in no position to answer.

In terms of the price of fuel, one should not look at the price of fuel last week compared to this week. One should look at the price of fuel at the time of the last increase, which was in 2002, when I think the price of fuel was probably in the region of US$20. Today, the price of fuel, as Mr Tan Soo Khoon has mentioned, is slightly below US$50.

Mdm Halimah Yacob (Jurong): Sir, I would like to ask the Minister how the funds which the transport companies contribute to the Public Transport Fund will be disbursed. Would the Minister be able to tell us whether the grassroots

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organisations will be able to tap on those funds?

Mr Yeo Cheow Tong: Sir, if I recall, the last time they contributed, it was partly given to the CDCs to distribute. So I am sure they will follow the same procedure. The grassroots organisations can appeal through the CCCs to the CDCs or directly to the CDCs.