Govt to review letting rail operators run non-fare business

LTA said it has called a tender "for a consultant to provide advisory services for the rail non-fare business".
LTA said it has called a tender "for a consultant to provide advisory services for the rail non-fare business".PHOTO: THE BUSINESS TIMES

The Government will review the current practice of automatically allowing rail operators to run non-transit businesses on the MRT lines that they operate.

Should the two roles be separated, transport experts say it could help a rail operator sharpen its focus on raising reliability, but it could also lead to higher fares or government subsidies.

In response to queries from The Straits Times, the Land Transport Authority (LTA) said yesterday it has called a tender "for a consultant to provide advisory services for the rail non-fare business".

This was in line with what it said last month when it awarded the operating contract for the upcoming Thomson-East Coast Line (TEL) to SMRT - that it would be calling a separate tender next year for the line's non-fare business.

"This is a pilot initiative to optimise the use of commercial and advertising spaces in TEL stations and trains, so as to enhance the vibrancy and financial sustainability of the line," an LTA spokesman said.

"In preparation for the tender, LTA intends to engage a consultant with the right expertise to advise us on the commercial arrangements, revenue framework, and the technical and operational specifications for the future non-fare operator," he added.

The spokesman said the Government will consider the results from outsourcing the TEL's non-fare business and will conduct "a thorough review" before making any recommendations for existing rail lines.

According to recent financial results, non-fare profits for both SMRT and SBS Transit have outstripped those for their core businesses in recent years.

Singapore University of Social Sciences economist Walter Theseira said outsourcing the non-fare business "eliminates a potential distraction for the transport operator's management".

With limited management time and capacity, it may not be the best idea to have transport operators intensively manage non-fare business in-house, he added.

"I suspect that is the most important reason. A secondary reason is that it will help to focus attention simply on whether the operator is good or bad at running transport services," said Dr Theseira.

"An operator can't hide deficiencies in transport operations through profits from non-core businesses. This will probably help improve contestability, since the contest to run public transport services will be based only on competence at running core services."

But he noted that because non-fare business currently subsidises a transport operator's operations, taxpayers may end up bearing some consequences.

"The taxpayer will benefit only if the third party can generate more net profits than the public transport operator was able to," he said.

Christopher Tan

A version of this article appeared in the print edition of The Straits Times on October 24, 2017, with the headline 'Govt to review letting rail operators run non-fare business'. Print Edition | Subscribe