Thinking about our commuters, PTOs and fares: finding the right balance

The Public Transport Council (PTC) has received the fare applications from our Public Transport Operators (PTOs) SBS Transit and SMRT for the 2016 Fare Review Exercise.

I am thinking about the 2016 fare exercise. We are in a unique situation of having a fairly large negative quantum of 5.7%. So it is no surprise that I have been asked if PTC will consider granting the full quantum for this Exercise.

I need to do what is right for our commuters. I also need to do what is right for the PTOs. My colleagues and I in the PTC must find the right and proper balance. There is no silver bullet or easy decision.

The big picture seems to be this.

Our public transport scene is changing to meet the needs and expectations of our commuters. Buses are transiting to the bus contracting model. Our rail lines operated by SMRT have recently transited to the New Rail Financing Framework.

Our commuters’ increasing expectations for service delivery, especially in train reliability are understandable. Maintenance of our rail systems would need to be rigorous. Obsolete assets in the rail system will need to be replaced. I expect heavy investments in these areas.

Energy prices remain volatile. While the fare reduction quantum reflects the sharp fall in energy prices over the last year, it may rebound sharply in the following years.

We need to attract and retain our public transport bus captains and the maintenance, depot, systems and technical workers. The recent experience by the bus captains of Go Ahead shows that the system is evolving and will take time to stabilise.

Collective agreements of our bus captains and transport workers will expire at the end of this year and next year. This means that there will be negotiations for better remuneration and terms of service in due course.

What does this mean?

It means that we may need, for this fare exercise, to take a broader or longer view on fares; at least beyond the current 2016 fare review exercise. The current fare formula lapses end 2017; and there will be an overall review of the fare adjustment mechanism.

It also means that  trade-offs seem necessary to optimise the interests of our commuters, balanced against the need for operators to sustain a viable public transport system; as well as the financial burden of the  Government’s expenditure on public transport infrastructure and assets.

Public Transport Fares Affordability Has Improved

Public transport fares have remained relatively stable and affordable. The second decile (representing lower income group) and second quintile (representing average public transport user) are spending smaller proportions of their monthly income on public transport expenditure, compared to ten years ago.

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At a recent meet up with some Choa Chu Kang residents, they have informed me that they spend about $60-$80 a month on public transport expenditure. They hope that fares would remain affordable.

This year, given the rather significant -5.7% figure, it would be understandable if commuters hope for a corresponding drop in fares.

We will need to make the best decision, given the circumstances. This is something my Council Members and I have to collectively ponder over the next few weeks.

Consulting our commuters and other public transport stakeholders

In our first Advisory Report we consulted widely with the various segments of our commuters. Our commuters were helpful and gave very useful insights. We reviewed and studied the concerns on fares arising from this engagement. We have also been monitoring the traditional and social media feedback on fares. These are useful data.

I thought it was also opportune for my colleagues and I to take a fresh face-to-face sounding of our commuters through focus group discussions at constituency levels on our 2016 fare exercise.

In addition we had frank conversations with our transport workers representatives from the National Transport Workers Union (NTWU).

We also wanted to ensure that we are not blindsided and discussed the considerations for the 2016 fare review with public transport experts.

What are the main things we learnt from these data reviews and engagements?

Two key views surfaced.

1.      A Simplified Fare Structure

The expanded rail network and huge injection of buses into the public transport network which we are witnessing will push our public transport onto a new level where travel options multiply and become dynamic.  Our fare structure will similarly become more complex. Hence, this is one area for my Council members and I to consider when we review the fares.

Underground rail lines are overall more expensive to operate and maintain. For example features like the air conditioning in the underground platform add to cost. Currently, fares for North East Line, Circle Line and Downtown Line are slightly higher than that of a journey of the same distance on above-ground rail lines or bus routes.

It is not a new phenomenon and the anomalies experienced by some residents in Bukit Panjang taking Downtown Line 2 was addressed in Parliament in January 2016. Over the next few years, as more rail lines open, this problem of differential in fares will become more pronounced.

With the significant -5.7% quantum we are seeing this year, it certainly seems like an opportune juncture for PTC members to make a recommendation to standardise fares for all rail lines and bus routes.

It is clear that commuters prefer a simple fare structure. All public transport fares should be calculated simply, using distance travelled, regardless of the chosen mode and route, air-con or fan ventilation.

2.  Longevity of our public transport network.

The second view has to do with service reliability and long term sustainability of the public transport system.

At a time when we continue to push for improvements to public transport service levels, there will invariably be higher cost pressures on public transport operators and the Government, even if the fare formula yields a negative quantum. This is something we will need to take into consideration.

There have been high Government subsidies on our public transport network. On the part of the Government, 1,000 more buses will have been injected into the nation-wide fleet by 2017.   This was made possible through the $1.1 billion Bus Service Enhancement Programme announced in 2012.  Another $4 billion will be spent to subsidise bus services over the next five years under the Bus Contracting Model.

The rail network too, has an equally impressive outlook. Government expects to spend over $4 billion under the NRFF on renewing, upgrading, and expanding operating assets for the next five years. This is on top of the $20 billion that the Government has committed to spend on building new rail lines in the same period. By 2030, the entire network will be doubled to about 360km.

As these physical transformations take place, service quality needs to be upped too, to keep pace.  We require the rail operators to invest more heavily in reliability. These improvements come with a cost.

Realistically, it is not sustainable to keep imposing higher standards on our operators while fares remain unchanged, or to keep increasing the level of subsidies from the Government. The experts’ view is to avoid large fluctuations in fares which may create adverse impact to industry stakeholders; and to have small and gradual fare adjustments instead.

A fine balance is therefore necessary to ensure that our public transport system remains viable and sustainable in the long run.

Our NTWU members are worried about the manpower crunch and high attrition of transport workers. They have asked for the fare adjustment to be moderated. A large fare decrease may make it more difficult for operators to offer competitive remuneration packages for transport workers, and will pose greater challenges in attracting new recruits and retaining existing staff.

Ensuring a Sustainable Fare System for All

As a Council, it is our responsibility to consider all these factors carefully in the best interests of commuters, the public transport operators and the Government. We are therefore listening to the views of commuters, studying public transport operators’ submissions for the Fare Review Exercise and consulting experts before making a recommendation. It will not be an easy decision and the process will likely take us to the end of the year. But one thing is for sure:  the decision will be robust, fair and well-considered.

Richard Magnus
Chairman, PTC

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