What PTC considered for new fare formula

We refer to Mr Christopher Tan's commentary (New fare formula raises questions about transparency; March 23) and two letters (Unfair to pass cost of poor management to commuters, by Mr Gabriel Cheng Kian Tiong; and, Include commuter experience in fare computation, by Mr Desmond Teo Mingjie; both on March 24).

The new fare formula retains all the previous macroeconomic indicators, which ensures that actual costs borne by the public transport operators (including inefficiencies) are not directly passed on to commuters.

This has worked well to impose cost discipline on the operators, who are effectively benchmarked against market efficiency.

This is a longstanding principle which the Public Transport Council (PTC) will continue to adhere to.

While price indices account for inflationary pressures, they do not allow fares to respond to cost changes due to capacity adjustments.

The Network Capacity Factor (NCF) ensures a more equitable sharing of the operating costs of future capacity enhancements.

It tracks adjustments in capacity, while netting off cost changes that can be recovered through growing ridership.

Contrary to Mr Cheng's concerns, the new formula does not recoup past operating costs incurred by the operators.

It also does not attempt to recover costs incurred by the Government in constructing our public transport infrastructure.

The Government will continue to subsidise public bus and rail services - about $5 billion and $4 billion respectively over the next five years - and the $20 billion in development costs over the same period.

Mr Tan asked for some of the numbers used to compute the NCF.

As the NCF will potentially impact millions of commuters, PTC will take some time to thoroughly process the data from operators.

Similar to previous years, the fare adjustment quantum, including the NCF quantum, will be published at the start of the annual fare-review exercise later this year.

PTC had also considered Mr Teo's and Mr Tan's suggestion to incorporate commuter experience into the fare formula, but decided that service quality should be kept separate from the fare formula as it is currently safeguarded by existing regulatory frameworks for bus and train services, such as the Operating Performance Standards.

PTC remains committed to its mandate to balance the interests of commuters with the sustainability of the public transport system.

Even with the latest changes in the fare formula, we will ensure that fares remain affordable.

Daniel Lau

Director, Policy and Regulation

Public Transport Council

A version of this article appeared in the print edition of The Straits Times on March 28, 2018, with the headline 'What PTC considered for new fare formula'. Print Edition | Subscribe