Regular fare increases will be needed to ensure the new bus contracting model that the Government is adopting remains financially sustainable, said Transport Minister Lui Tuck Yew.

Answering questions on the new model in Parliament on Monday, Mr Lui said that under the current model, operating costs had well exceeded fare increases from the middle of the last decade.

From 2005 to 2012, the annual fare increase was 0.3 per cent on average, while wage increases and fuel costs were much higher, he said.

"There will be a need for us to make sure we have regular fare increases of the right quantum," he said. This will be determined by the new fare formula and the Public Transport Council, he said.

Holland-Bukit Timah GRC MP Christopher De Souza had asked Mr Lui how to ensure the new contracting model is financially sustainable in the long term.

Besides fare increases, Mr Lui said all requests for new routes or higher service standards must be "judiciously" assessed.

Running more new routes with low ridership will mean government subsidies have to go up, said Mr Lui. So the Land Transport Authority (LTA) is working out a framework on the threshold "that a new route ought to meet before we can agree for it to be operated", he said. Alternatively, a new route may be tested for some months and then eliminated if it is not viable, he added.

In addition, costs will rise when buses are run more frequently, he said. "And so we again have to quite judicious when we raise service standards to make sure that we do not overstep and hence ultimately result in a much bigger bill in term of the subsidies that we have to pay."

Non-constituency MP Gerald Giam and nominated MP R Dhinakaran asked for details on the budget and subsidies set aside for the new model, which will see the Government own all bus infrastructure and buses, and carve up existing bus routes into 12 packages for competitive tendering.

In response, Mr Lui said it is probably not in the Government's interest to reveal any budget or how much it is prepared to subsidise, as this could skew the bids.