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PTC approves tiered increase in bus and train fares


Adjustment to Bus and Train Fares under the New Fare Review Framework

The public transport operators (PTOs), namely SMRT Corp (SMRT) and SBS Transit (SBST), applied to the Public Transport Council (PTC) in early May for an increase in bus and train fares.
After extensive studies and deliberations of the PTOs' fare applications over the last four weeks, the PTC has approved an overall fare increase of 2.4% for 2005.
This is in line with the new fare review framework recommended by the GPC1- led Fare Review Mechanism Committee (FRMC) in February 05 and accepted by the Government in March 05.
PTC has approved a tiered increase in fares according to the distance travelled. With effect from 1 July 2005, adult EZ-Link fares will increase by 1 to 2 cents for buses and 1 to 3 cents for trains while adult cash fares will increase by 10 cents across-the-board.
This tiered increase will help to minimise the impact on commuters who make short trips or transfers, as adult EZ-Link fares for the first fare band of bus and train fares will be increased by only 1 cent.
Child/student fares and prices of student/NSmen concession passes will not be increased, as PTC is mindful of the impact of any fare increase on these dependent groups.
Factors Considered
Under the new fare review framework, fares may be increased by 2.4% (on average) this year based on the new formula as follows:
Maximum Fare Adjustment = 0.5CPI + 0.5WI - 0.3%,
where CPI refers to the change in Consumer Price Index over the preceding year, and WI refers to the change in Average Monthly Earnings (Annual National Average) over the preceding year, adjusted to account for any change in the employer's CPF contribution rate. The 0.3% is the productivity extraction to be used for the next 3 years. For this year, CPI and WI is 1.7% and 3.6% respectively.
The PTC has considered the various factors recommended by the FRMC and concluded that there are no extenuating circumstances that require PTC to either vary the fare adjustment quantum determined by the new formula or to reject it. Specifically, the Council is satisfied that the current economic condition is not considered to be adverse and that there is no significant deterioration in the overall affordability of public fares as illustrated below.

The latest GDP growth forecast of 2.5% - 4.5% for 2005 is consistent with the long term GDP growth for 3% - 5% envisaged for Singapore;

The unemployment rate for March 2005 has improved to 3.9% as compared to 4% in 2004 and 4.7% in 2003; and
There are no signs that the affordability of public transport has deteriorated in recent years, even with a small fare increase for 2005. The affordability indicator2 recommended by the FRMC shows that the percentage of monthly household income spent by the characteristic family on public transport has decreased slightly from 5.4% in 2003 to 5.2% in 2004. As an indicative check on a 2.4% fare increase, the affordability indicator could even decrease slightly, given the likely prospect of improving general wage level for 2005, and since child/student fares and concession passes remained unchanged.
As recommended by the FRMC, the PTC has also made a reality check on PTOs' ROTA (Return on Total Assets) to further ensure commuters' interests are protected. For the financial year ended in December 2004 or March 2005, the ROTAs (with respect to only the bus and train operations) are 4.6% for SBST and 6.5% for SMRT, based on the proforma accounts3 submitted by PTOs.
The PTC is satisfied that while PTOs' profit levels can be considered to be healthy, they are not excessive when compared with companies with similar industry structure and risk profiles.

Source: Public Transport Council Press Release 30 May 2005



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31 May 2005