Friday, 3 April 2015

Transport Fare Hikes 2015: Seriously, Are You Ready?

Transport Fare Hikes — Still Necessary Now?
Are You Ready for the Ride?


As expected, the two public transport operators (PTOs) in Singapore, ComfortDelGro (CDG) and SMRT had achieved unprecedented profits due mostly to the more than 60% drop in oil prices over most of their past financial operating year.  It was reported that CDG’s FY14 revenue rose 8.1% while its PATMI (post-tax profits minus interests) grew 7.7%.  Its PATMI was attributed to broad-based revenue growth across bus, rail and taxi segments.  Similarly for SMRT, its 3QFY15 PATMI jumped 58.4% year-on-year as revenue rose 6.8% on both non-fare and fare businesses recorded huge broad-based growth due to vastly improved operating margins also in the fourth consecutive quarters.

Even without the impending transport fare increase, both CDG and SMRT enjoy continually low and lower oil prices as well as huge Singapore Government subsidies.  Their stock prices have soared through the roof and huge profitability are eagerly expected in 2015 and possibility 2016 by their private shareholders as they milk the public and docile cash-cow. 

So, are the Transport Fare Hikes for 2015 still necessary?    

The 2015 transport fare hikes which is effective from 5 April 2015 is highly controversial, for reasons unlike previous transport fare hikes which were deemed necessary to maintain the “economic viability” of the PTOs.  As evident above, the PTO are enjoying unprecedented windfall profits and very remote from becoming “un-viable”. In view of falling oil prices, the increase in public transport fares has sparked an outcry in Singapore. Many raised questions about why falling oil prices did not translate into lower commuter fares. Despite numerous responses and explanations from the PTC, the general public sentiment has been one of dissatisfaction, where for some the government broke a “social contract” in the provision of public transport services.


In the Video, you would hear many reasons for the public frustrations towards our transport system, not least the impending fare hike in 5 April 2015. 



debateIQ Video: “Transport Fare Hikes — Necessary Now?"
Participants: Viswa Sadasivan, Editor-In-Chief, IQ; Michael Heng, President & CEO of Energycorp Global Pte Ltd; Asst Prof Walter Edgar Theseira Economics Division, Nanyang Technological University (NTU); and Farhan Shah, Editor, DrWealth.com

The IQ Team has also selected a reading list focusing on various aspects of Singapore’s public transport system, including a statement from the Public Transport Council.

1. “The Evolution of Public Transport Policies in Singapore”, 2013, Lee Kuan Yew School of Public Policy, NUS
The 1996 Land Transport White Paper undertook to achieve the vision of a world-class transport system for the city-state in 10 to 15 years’ time. Amidst new schemes like the Electronic Road Pricing (ERP) and the revision of taxi fares, the plan was to have 75 per cent of all daily trips in Singapore made by public transport eventually.
Read this case study for a helpful overview of the system we have today, comprising:
A] The evolution of Singapore’s policies on public transport — beginning from the landmark 1996 Land Transport White Paper. 
B] The resultant revised Land Transport Master Plan and fare reviews in 2013.
C] Policy shifts that have occurred since the early 2000s and reactions to these shifts.
D] Key considerations and trade-offs in policy adjustments.


2] Public Transport Council: “Fare Hike and Breakdowns Should be Kept Separate Issues”, via www.reach.gov.sg
Back in 2014, the Singapore’s government feedback unit, REACH, published a response from the Public Transport Council regarding fare hikes and breakdowns in public transportation:
“Dear Contributors,
In deciding any fare adjustment, the Public Transport Council’s (PTC's) mandate is to strike a judicious balance between safeguarding commuters' interest and the financial viability of the public transport operators (PTOs). The allowable fare adjustment quantum is based on a formula that is pegged to macro-economic factors… [Read original thread on REACH]

3] Farhan Shah, “This is Why SMRT and SBS are on SGX”,
5 Feb 2015, DrWealth.com
A panellist for our debateIQ “Transport Fare Hikes — Necessary Now?”, DrWealth.com editor Farhan Shah, gives a perspective on why the SMRT and SBS are on the Singapore Stock Exchange. Do these operators need public listings to raise funds now that the government is taking over the purchase of key capital assets? And if share prices are less dependent on fare hikes and other revenue, will it instead be tied to the level of productivity and efficiency that these two companies achieve? More importantly, how do these operators hope to please both their two main stakeholders, i.e., shareholders of their stocks as well as commuters who are also their customers? [Read full article]

4] Michael Heng, “Singapore — Social Contract Breached”,
24 January 2015, MikoSpace (blog) 
Michael Heng, an outspoken panellist on our debateIQ “Transport Fare Hikes — Necessary Now?”, had earlier framed the latest public transport fare hike as a possible “breach of social contract” between the government and the people. He also proposes the idea of a social enterprise model for public transport operators. [Read full article]  

5. Failrail.sg, “Train Service Reliability — A Numbers Game”
Failrail.sg is a site that tells the “bigger story of a troubled rail network through data visualisation”. Presented in the form of data journalism, this article charts reported incidents by LTA against other sources. The writer highlights how incidents are presented in official figures, often in ratios rather than actual numbers, and calls for a need for fuller data reporting. [Read full article] 

IQ Readers’ Comments:
i'm very interested to hear the idea of a social enterprise running the public transport service. is this something that's done elsehwhere in the world. sounds very innovative and if singapore can get the formula right (providing public good and with a sustainable business model), we can once again set an example to other cities facing transport issues!

Public transport is inherently loss-making. No company will invest in infrastructure on such a large scale. Only the govt can afford it. And only govt can give the subsidies to commuters to make sure people can afford it. But why the large profits we see in SMRT and SBS? Maybe better communication is needed on the way fares made up. How do we compare to other types of pricing in other parts of the world?
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Seeing as the government has essentially bankrolled private bus and rail operators through the years, is this model of socialising costs and privatising benefits sustainable in the short, medium and long term?

Hey where's the authorities? no MOT, LTA, SMRT, SBS or PTC? 
What's the reason why they declined? 

At the start the host said the Minister for Transport declinedthe invite. DId not give a reason though.

Yes I did realize, which is why I'm asking what the reason is. 

Why isn't falling oil prices translating to lower public transport fares
I'm puzzled as to why despite falling oil prices, the price of transport has increased! This to me is very ridiculous. Mainly because public transport is a public service, emphasis on the word "public". Then why is it being run like a corporation with aims of profit? The transport system is an essential infrastructure integral to the running of the nation, yet it has experienced so many issues - conjestion, breakdown and on top of that fare increases every year! Does LTA/PTC/SMRT feel shame for their failure to deliver yet still increase prices? Is this fair? Do we even have a similar alternative to this "public" service, is there another bus or train provider? Is the Public Transport Council even necessary if prices are just going to rise annually?

We know that the PTOs are not making money off fares, but off advertising rental, etc. But why can’t then they take some of the profits and pump it back into operating costs? 

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I don't mind fares rising if service/frequency is improved. But it's not. At least to me. I take the bus 53 from Serangoon Central. At 10pm in weekday evenings, I still have to wait for 2-3 buses to pass by because they're full and passengers can't get on. 10pm... imagine that!

That is true, why pay for to have service standards remain the same? 
But if the authorities were to say, pay in advance so we can help you develop a better system.... I say no because we have lost trust in your capacity to deliver what the people on the ground needs.
I think in general Singapore has lost trust in the public transport system, and they should take effort to show us that they want to earn our trust back. Improve standards first and then raise the fares, I think the public won't be as outraged. 
I honestly don't mind paying for better transport but i don't foresee any improvement, so why should I agree to do so?

I agree with Michael Heng, why can't the profits made be pumped back into the system. Social entreprise. That's the way.
                        

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