Any increase in public transport fares next year will be lower than the original roll-over figure of 3.4 per cent. In an exclusive interview with Channel NewsAsia, Transport Minister Lui Tuck Yew said “the maximum that is allowed for this particular fare increase will be 2.8 per cent”.

This figure results from deducting the fare adjustment quantum of -0.6 per cent, which is due mainly to a drop in energy costs.

The Public Transport Council (PTC) began its annual fare review exercise last month, and results are expected to be announced by the first quarter of 2015.

The last review in Jan this year announced a fare increase of 6.6 per cent, to be adjusted in two steps. A 3.2 per cent hike was implemented in Apr, and the remaining 3.4 per cent carried forward to the current review. The rollover system was a recommendation made by the Fare Review Mechanism Committee in Nov 2013.

The fare formula is based on four components:

1) Core CPI inflation: This currently stands at 1.7 per cent, and excludes home and car prices.
2) Average wage increase, at 4.3 per cent
3) Energy index: This registered -12.6 per cent, due to a drop in energy costs in 2013. The energy index reflects the rising cost of power and fuel as a proportion of an operator’s expenses.
4) Productivity index at 0.5 per cent, where operators share productivity gains with commuters.

These components have been given weightage of between 20 and 40 per cent – 40 per cent for core consumer price index (CPI), 40 per cent for wage index, and 20 per cent for energy index.

The fare adjustment quantum formula is as follows: CPI + Wages + Energy – Productivity = Fare Adjustment Quantum. So this year’s fare adjustment quantum is -0.6 per cent.

Said Mr Lui: “Here we are using 2013, for this fare formula. We know that energy costs have come down, as compared to 2012, which is why for the most recent year, the index was actually -0.6. You may recall that it was 6.6 per cent, of which the most recent fare increase gave an upward revision of 3.2 per cent. So there was a 3.4 per cent that was carried over, and now taken together with the -0.6 per cent, which was derived using all the numbers in 2013, the maximum that is allowed for this particular fare increase will be 2.8 per cent.”

The PTC also told Channel NewsAsia it will consider this fare adjustment of 2.8 per cent for the current review exercise. Public Transport Operators SBS Transit and SMRT have until Friday (Dec 19) to submit their applications to the PTC for a fare increase, subject to approval by the Council.

The Transport Minister stressed that the fare review must ensure public transport remains affordable. At the last review, concessions were introduced for low-income workers and those with disabilities, to balance the fare increase.

Observers say this move should continue. Said Chairman, Government Parliamentary Committee for Transport Cedric Foo: “There is a group of needy people that we must always pay attention to, and do whatever we can to help them. Median income may rise, but those stuck at the bottom decile may still struggle with even small fare increases. So I would like to see the public transport voucher and low-wage concessions as permanent features. People who are dealt a poor deck of cards from birth – persons with disabilities – I think they should always be helped.”

The PTC has also been urged to cushion the impact of fare increases on senior citizens. In addition, the Government is looking at the possibility of introducing off-peak monthly passes for commuters.

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