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Oral Reply by Minister for Transport Khaw Boon Wan to Parliamentary Question on Government Subsidies for Operating Costs for the Thomson-East Coast Line

13 Feb 2019 In Parliament

Assoc Prof Walter Theseira asked the Minister for Transport

a.     what is the currently projected share or range of operating costs for the Thomson-East Coast MRT Line that is expected to be covered by fare revenues versus by
Government grants and subsidies; and

b.     in light of the financial difficulties faced by operators of the existing MRT Lines, what share or range of operating costs for these lines are expected to be covered by existing operators versus by Government grants and subsidies.

Reply by Minister for Transport Khaw Boon Wan:

1.     The Government has invested and subsidized heavily to ensure that our rail network is reliable, convenient and affordable.

2.     First, the Government fully bears the upfront cost of building new rail lines. Over the next 5 years, the Government will be spending about $25 billion to expand our MRT network. The major rail lines that are being constructed during this period are the Thomson-East Coast Line (TEL), Jurong Region Line and the Cross Island Line. When completed, there will be a total of 8 MRT lines, and 8 in 10 households will live within a 10-minute walk from a train station.

3.     Second, the Government will be spending around $4.5 billion over the next 5 years to build up, replace and upgrade rail operating assets on the rail network, including trains, signaling systems and power supply systems.

4.     Under the current financing model, the operating and maintenance costs (or O&M costs for short) are fully borne by the two rail operators, SMRT Trains and SBS Transit. The rail operators have intensified their O&M regimes over the past few years to raise reliability. Coupled with LTA’s asset renewal, rail reliability has improved significantly. Last year, the MRT network achieved a Mean Kilometres Between Failure (MKBF) of 690,000 train-km. This is a significant improvement of over three times from 2017, when the network MKBF was at 181,000 train-km. We expect further improvement this year.

5.     These efforts at raising rail reliability are costly. They have taken a toll on the rail operators. In the financial year ended 31 March 2018, SMRT Trains reported a loss of $86 million, against an operating cost of $838 million and commuters’ fare income of $608 million1. SBST’s Downtown Line also incurred a loss of more than $47 million for the financial year ended 31 December 2017, against an operating cost of $132 million and commuters’ fare income of $69 million1.

6.     In the case of TEL, the Government recognized that its ridership in the initial years will be uncertain as the line will be opening in multiple stages over six years. The Government therefore decided to bear the revenue risk by subjecting TEL to an arrangement similar to public buses for its first concession period of nine years. Under this model, the Government collects fare revenue and pays the operator, SMRT, a service fee for O&M. This is unlike the arrangement for other rail lines.

7.     Rail reliability is a national priority. We will continue to work towards improving rail reliability, making our rail network among the most reliable in the world. Achieving such a goal requires a regular investment in substantial expenditures to support intensive maintenance. We will strike the right balance between what should be borne by taxpayers through direct Government funding, by commuters through fares, and by operators. We are however mindful that any decision to increase the level of Government funding for rail operations has to be weighed against competing needs such as healthcare and security.

Non-fare income partially covers the shortfall between operating costs and fare income.