SINGAPORE — A year after a transport fare hike was deferred due to the economic difficulties caused by the COVID-19 pandemic, bus and train fares will increase by three to four cents per journey from Boxing Day, said the Public Transport Council (PTC) on Wednesday (3 November).
For adult commuters using fare cards, this amounts to an increase of three cents for journeys equal to or less than 14.2km (for example, Sengkang to Raffles Place), and an increase of four cents for journeys of more than 14.2km (for example, Boon Lay to Pasir Ris). Around three quarters of adult journeys in 2021 so far covered 14.2km or less, while the remaining 25 per cent covered more than 14.2km.
Some 2 million commuters paying concession card fares, including senior citizens, lower-wage workers and students, will see an increase capped at one cent per journey.
Single trip tickets for trains and cash fares for buses will remain unchanged, while the prices of all concession and travel passes will also stay the same.
In response, the Ministry of Transport (MOT) said that the government has accepted the PTC's recommendations, and that it will continue to heavily subsidise public transport.
To help offset the cost of the fare hike, some 600,000 public transport vouchers worth $30 each will be distributed to eligible households. These are drawn from the Public Transport Fund, and operators SBS Transit and SMRT will be required to contribute about $2.23 million in total to the fund this year.
The revision follows the annual Fare Review Exercise (FRE), where the PTC granted the full allowable fare adjustment quantum of 2.2 per cent to help mitigate the costs of running public transport services.
The calculation for this year’s fare formula is -2.2 per cent, which has helped moderate the 4.4 per cent quantum from last year that was carried over. Hence, the maximum allowable fare adjustment quantum for 2021 is 2.2 per cent.
Addressing reporters at a virtual media briefing, PTC chair Richard Magnus said it was not possible to keep deferring fare increases as they are needed to support rising operating costs, such as energy and wages, for the public transport system. Public transport operations must be able to run sustainably even as there is a wide gap between costs and fare revenue, he added.
Asked why authorities are helping to keep public transport operators (PTO) afloat instead of letting the free market dictate fare prices, Magnus stressed that public transport remains a public good. "Allowing the market forces to operate would mean really looking at high and higher fare prices. The challenge then is to make sure that our public transport operates sustainably, at the same time balancing that with the issue of fare affordability."
Operators facing twin pressures
The latest increase amounts to additional fare revenue of some $14.6 million annually for the two PTOs combined. Land Transport Authority Chief Executive Tan Kim Hong stressed that the fare hike is only meant to help the operators during a "challenging period", and not intended to offset or cover rising operating costs.
The PTC noted that the operators face the twin conundrum of substantially reduced ridership, leading to decreased fare revenue, and rising cost pressures that are due to Singapore's economic recovery. Ridership began falling "drastically" from February 2020 after Dorscon Orange was announced, dropping to a quarter of pre-COVID levels during the Circuit Breaker phase from 7 April to 1 June.
However, buses and trains continued to operate largely at pre-COVID frequencies, while additional costs from enhanced cleaning and disinfecting regimes and safe management measures have run into the millions.
Meanwhile, energy prices, in particular, have risen by more than a third for the first half of this year. In 2020, both rail operators would have incurred significant losses if not for broad-based government support to help cushion the financial impact of low ridership and additional cleaning, said the PTC.
The government has been providing close to $1 billion per year to renew rail operating assets, and another $1 billion to subsidise bus operations every year. This translates to more than a dollar in subsidies for every journey.
With the twin pressures of lower ridership and sustained rising costs, and with the work from home and hybrid working model in place, Yahoo News Singapore asked if the PTC expects further fare increases. Magnus replied that the trends are still unclear, but noted that people are still travelling on public transport for social and recreational reasons. He added that PTOs will also need to review ways of bringing in additional revenue and cutting costs.
Network Capacity Factor and fare adjustment formula
The current fare adjustment formula, which applies till next year, is a calculation of various components such as the Core Consumer Price Index (cCPI), Energy Index (EI) and Network Capacity Factor (NCF), or capacity provision relative to passenger demand for the entire public transport system.
The NCF reflects changes in cost due to enhancements in public transport capacity, such as running more trains and buses relative to commuter demand. It is positive when demand grows slower than capacity.
However, the PTC noted that the NCF is not designed to track short-term fluctuations in public transport demand and supply during exceptional periods. If computed in full from January to December 2020, the NCF would have been 50 per cent, which translates to about an increase of 60 cents in fares if fully factored into the FRE.
In this regard, PTC decided to exclude the NCF contributions from the months of February to December 2020, starting from the announcement of Dorscon Orange. This resulted in an NCF value of 0.7 per cent instead.
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