Public transport fare hike is small compared to the increase in operating costs, analysts say

SINGAPORE: The public transport fare hike should be viewed in the context of even higher operating costs, analysts said, following the Public Transport Council’s (PTC) latest fare review exercise.

Citing cost pressures and other challenges, public transport operators SBS Transit and SMRT Trains applied for the maximum fare adjustment of 22.6 per cent.

The 22.6 per cent figure comprises last year’s deferred increase of 10.6 per cent and this year’s adjustment of 12 per cent, which was driven by increases in energy prices, core inflation and strong wage growth.

However, the PTC decided on an overall fare increase of 7 per cent and deferred 15.6 per cent to future reviews of public transport fares.

“Given this backdrop, the 7 per cent is small,” said Assistant Professor Terence Fan of the Singapore Management University (SMU).

But he acknowledged that it may be a bit of a shock compared with previous years, which were usually below 5 per cent. Fares increased by 2.9 per cent last year.

Transport economist Walter Theseira said the PTC appears to have been guided by wage changes.

“As median wage increases last year were also quite high in nominal terms at 6.5 per cent (MOM total wage change figures) due to inflation, 7 per cent is actually comparable to that,” said the associate professor from the Singapore University of Social Sciences (SUSS).

Adult commuters will pay 10 to 11 cents more per journey from Dec 23.

PTC chair Janet Ang said the council wanted to keep fares affordable, while keeping the public transport system “financially sustainable”.

Assistant Professor Fan said between those two factors, the PTC is “veering very much towards the affordability side of things”.

GOVERNMENT SUBSIDIES

The government agreed to provide an additional subsidy of S$300 million (US$220 million) for this year's fare review exercise, on top of more than S$2 billion in operating subsidies annually across bus and rail.

Assoc Prof Theseira of SUSS said fiscal support from the government is what makes public transport financially viable.

“Without the breathing room granted by (government) subsidies, it would have been necessary to implement much higher fare adjustments, as is the case in other public transport systems globally where there are funding shortfalls,” he said.

The actual operating costs have risen much more than 7 per cent, and there is “quite a large operating deficit”.

Associate Professor Raymond Ong from the National University of Singapore said that the deficit needs to be borne by someone, and it should not fall solely on consumers.

“Public transport is supposed to be the backbone of car-lite Singapore,” he said, adding that it is for the good of the public, including those who may be disadvantaged.

The commuters will bear about a third of the increased costs, while the government covers the rest of it, he said.

Analysts also pointed out that the prices of monthly travel and concession passes either held steady or decreased.

Assoc Prof Theseira said single-trip commuters and occasional commuters will pay higher fares than “heavy” users of public transport.

“I think this makes sense as this is the practice in many cities to ensure that those completely reliant on the public transport system are more protected, as they are often from the lower income groups as well,” he said.

“Single trip users, after all, also include tourists which we probably don't want to subsidise, or commuters who are less likely to be reliant on public transport.” 

The government will also provide public transport vouchers worth S$50 each to lower-income households.

FUTURE FARE INCREASES

Fare increases are unlikely to get larger in the years to come, analysts said.

Assoc Prof Theseira said the PTC could continue to use wage increases when deciding how much to increase public transport fares.

“If wages don't rise significantly, there may not be much room to distribute the fare quantum.”

Assistant Prof Fan of SMU and Assoc Prof Ong of NUS are of the view that the PTC aims to distribute the price increases more evenly.

Assoc Prof Ong said the hikes may hover around 10 cents for the next few years, with some percentage of the allowable increase rolled over each time until energy prices and inflation stabilise.

At that point, the increases that were deferred can be passed on to consumers, he said.

Assistant Prof Fan shares a similar view.

“What they're trying to do is trying to smooth out the increases and not have like one eye-watering amount, and then like no increase the next year,” he said.

“They're trying to manage it. But I mean, it's a gamble, and it really depends on how the world changes and how the rest of the prices change.”

This article was originally published on Channel News Asia. Its inclusion on this website is solely for education purposes.