Jul 28, 2011
Net fare adjustments went down, not up: Transport council
IN EVALUATING fare applications, the Public Transport Council (PTC) is guided by the fare review mechanism adopted since 2005 and revised in 2008 to take into account the higher productivity gains by the two public transport operators (‘…And why this hike isn’t’ by Mr Leong Sze Hian; July 15).
The fare adjustment quantum allowed is based on national macro-economic factors such as the consumer price index and wage increases.
This caps the quantum of fare adjustment and ensures that operators cannot simply pass on all their cost increases to commuters by charging fares based on all their direct costs. The fare formula also has a productivity extraction component, which lets commuters share in the improvements of the operators’ productivity and efficiency. This contributes towards lowering the allowable fare adjustment quantum.
Mr Leong wrongly stated that fares had increased by 1.7 per cent in 2008, when operators received a net fare adjustment of only +0.7 per cent – less than the maximum fare adjustment rate of +3 per cent.
It is also noteworthy that while operators could have applied for a fare increase of up to 4.8 per cent in 2009, they offered instead a fare reduction package of -4.6 per cent (of which 3 per cent was a temporary fare rebate lasting 15 months) to help commuters through the economic downturn.
In addition, the PTC implemented the full fare reduction of -2.5 per cent allowed under the fare formula last year.
Therefore, if we were to add the actual fare adjustments between 2008 and last year, as Mr Leong did, commuters would, in fact, see a net fare adjustment of -3.4 per cent.
To be fair, Mr Leong should have used nominal wage data instead of real wage data in his comparison of the transport fare hike and inflation rates against wage growth.
For this year, the PTC will carefully review the applications from public transport operators before making a decision.
Eugene Tan
Secretary
Public Transport Counci
