SINGAPORE MASS RAPID TRANSIT (SMRT) (Fare hikes)

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SINGAPORE MASS RAPID TRANSIT (SMRT):

(Fare hikes): 8.

Mr Steve Chia Kiah Hong asked the Minister for Transport whether it is justified for Singapore Mass Rapid Transit to demand for more fare hikes when it can register a 25.8% year-on-year increase in net profit of $30 million for the third quarter of FY2006.

The Minister of State for Transport (Mrs Lim Hwee Hua) (for the Minister for Transport): Sir, Mr Steve Chia asked whether there is any justification for SMRT to demand for more fare hikes when it registered a 25.8% increase in net profit. First, I would like to note that the third quarter results recently announced by SMRT represent the group results of SMRT Corporation. Besides local bus and train operations where fares

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are regulated by the Public Transport Council (PTC), the group also has taxi operations and non-local public transport related businesses like engineering consultancy and overseas investments.

On the issue of fare revision, this will be considered by the PTC if and when SMRT decides to apply for one in May. As Members know, PTC is an independent body comprising representatives from different sectors of society, and its role is to regulate bus and train fares to keep fares affordable for the public, while ensuring the long-term viability of the public transport operators.

Under the new fare review mechanism implemented last year, the PTC is required to examine, as a reality check, the Return-on-Total-Assets (ROTA) achieved by the operators. This is to ensure that the operators' returns from bus and rail operations are not excessive when compared to those of other industries with similar risk profile. This is to safeguard commuters' interests when the PTC considers applications for fare adjustments.

I would like to assure Members that any fare revision applications will be scrutinised by the PTC very carefully.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Sir, may I ask the Minister of State how much profit should these public transport operators, whether as an individual unit or as a collective group, continue to make before their demands for any kind of fare increase become unjustifiable? That is, will there be a ceiling for their profits where continued requests from them for fare increase become unreasonable? And if there is such a ceiling for their profit, what is that level?

Mrs Lim Hwee Hua: Sir, when the PTC decides on the fare increase proposals, it will not just look at actual profits. In fact,

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they will be guided by many other things, one of which, as I have stated, is the Return-on-Total-Assets. In this regard, they could look at the transport operators elsewhere and compare those numbers to see whether these are reasonable. It will not be reasonable nor practical to impose an absolute number.