Cheaper energy prices point to lower bus and train fares

The Public Transport Council's annual fare review exercise is conducted using a formula that takes into account the previous year's changes in the inflation rate, wages and an energy index that charts oil and electricity costs. The council also consi
The Public Transport Council's annual fare review exercise is conducted using a formula that takes into account the previous year's changes in the inflation rate, wages and an energy index that charts oil and electricity costs. The council also considers requests from public transport operators.ST PHOTO: JAMIE KOH

Fares could be cut by a maximum 5.7%; Public Transport Council to announce decision in last quarter

A drop in energy prices may lead to lower bus and train fares being announced soon.

Fares could be cut by as much as 5.7 per cent in the last quarter of the year. This is the maximum adjustment allowed under the Public Transport Council's (PTC) latest annual fare review exercise, which began yesterday.

The PTC said the figure, which comes from a formula linked to economic factors, is "negative largely due to a reduction in energy prices". The council will now deliberate on how fares should shift, taking into account requests from public transport operators. It said it will announce its decision in the last quarter of the year.

When fares were last adjusted on on Dec 27, they were cut by up to four cents for each journey, in line with the maximum 1.9 per cent allowed in the fare formula.

The PTC said yesterday that it will ensure fares "strike a balance between ensuring that the public transport system is financially sustainable and keeping fares affordable for commuters".

For this year's fare review exercise, only the two rail operators, SBS Transit and SMRT, can ask for fare adjustments.

This is because the bus industry has been restructured into a contracting model from this month. The Government now pays operators SBS, SMRT, Tower Transit and Go-Ahead a fixed fee to run bus services, while it collects the fares and bears the revenue risk.

The bus operators "are not directly impacted by fare revenue", the PTC said.

It added that it will obtain information from the Land Transport Authority, which tenders out the bus contracts, on the fare review.

The current formula, valid until the end of next year, takes into account the previous year's changes in the inflation rate, wages and an energy index that charts oil and electricity costs.

The first two components are given a 40 per cent weighting each, while energy has a 20 per cent weighting. A productivity extraction of 0.5 per cent is also deducted from the derived figure. This is to allow commuters to share in the transport operators' productivity gain.

Government Parliamentary Committee for Transport chairman Sitoh Yih Pin said it is "speculative at this juncture to anticipate how fares will be adjusted".

Mr Sitoh, the MP for Potong Pasir, said the PTC is given the "discretion" to set the adjustment of fares based on the goal of balancing affordable fares with sustainable public transport.

When asked, SMRT did not confirm if it would be submitting an application for fare adjustments. SBS Transit's senior vice-president for corporate communications Tammy Tan said it will make an announcement if it does. Both operators have until Oct 7 to do so.

A version of this article appeared in the print edition of The Straits Times on September 14, 2016, with the headline 'Cheaper energy prices point to lower bus and train fares'. Print Edition | Subscribe