Public transport operators will have to share gains made from future fare increases with the needy if the Government backs a recommendation by a review committee.
The Fare Review Mechanism Committee recommended that the operators be required to contribute 20 to 50 per cent of the expected increase in fare revenue to the Public Transport Fund. The fund pays for transport vouchers for low-income commuters.
The Public Transport Council (PTC) should determine the quantum based on an operator's profitability, said the committee, which was set up to look into public transport fares.
Committee chair Richard Magnus said yesterday: "We think it is appropriate that the (public transport operators), besides having to fulfil their duties to their financial shareholders, also have to recognise their public service role."
But the committee, while asking operators to give to society, has also tweaked the fare formula to ensure their businesses remain financially sustainable.
The current formula pegs annual fare changes to inflation, wages and the productivity of operators SBS Transit and SMRT.
Mr Magnus said it is broadly sound but should be updated with an energy component to better reflect rising costs in that area.
Fuel and electricity costs comprised 23 per cent of the operators' expenses in 2011, up from 16 per cent in 2005.
The committee had proposed to add a new energy index to the formula to better represent changes to operational costs. The index gives equal weight to electricity and fuel costs.
Mr Cedric Foo, the chair of the Government Parliamentary Committee for Transport, noted that energy and fuel are not fully represented in the consumer price index (CPI) - the formula's inflation component.
While the CPI does reflect such costs, he said the weightage is smaller than what the transport operators incur.
SMRT spokesman Alina Boey said the energy index is a "welcome" measure that will address challenges of increased fuel and energy costs.
The proposed new formula will also use the core CPI, which excludes accommodation and private transport. Participants of focus group discussions had indicated that these items were not relevant to public transport and should be excluded.
The wage index component of the formula remains unchanged, while the productivity extraction has been revised to give operators incentives to improve output and share their gains with commuters.
PTC chairman Gerard Ee felt the new formula is "an improvement", as it is more specific and focused. However, he noted that the council will have to study the report in detail and await the Government's response next week.
The committee has also recommended that the PTC be allowed to "roll over" a portion of the fare adjustment quantum in a particular year to the next, or defer fare exercises if the economy is poor, for instance.
It said this flexible mechanism will smooth out any large fare increases yielded by the formula while providing operators with fair compensation for cost hikes.
In a Facebook post, Transport Minister Lui Tuck Yew said this mechanism will help avoid excessive fare hikes in any one year.
"My own view is that any fare increase should be below the average national-level wage increase for that year," he added.