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Oral Reply by Minister for Transport Khaw Boon Wan to Parliamentary Question on Update of Current Level of Rail Reliability and Sustainability of Efforts

08 Jul 2019 In Parliament

Mr Sitoh Yih Pin asked the Minister for Transport whether he can provide an update on the current level of our rail reliability and how such continued efforts are going to be sustained and funded. 

Reply by Minister for Transport Khaw Boon Wan:

1.     Our MRT service has stabilised. Our intense efforts to improve rail reliability are producing results. Reliability measured by Mean Kilometres Between Failure or MKBF shows significant and sustained improvement. In the 12 months ending in June 2019, the MRT network achieved an MKBF of more than 950,000 train-km, almost one million. This is a seven-fold improvement over 2015. Commuters have felt the difference. Recent surveys by the Public Transport Council, or PTC, show that commuters’ perceptions of MRT services have improved.

2.     Our MRT is now on par with other world-class systems like the Taipei Metro and Hong Kong MTR.

3.     These improvements are the result of a concerted multi-year effort. It required rigorous operations and maintenance, disciplined investment, and countless personal sacrifices by thousands of public transport workers who have worked day and night to improve the network. We should give them our thanks. I would also like to thank commuters for their patience and understanding. In particular, for ECLOs,  Early Closures and Late Openings, which have given LTA and the rail operators precious engineering hours to step up maintenance and renewal as our MRT lines age.

4.     Our efforts to improve rail reliability have, however, come at substantial expense to both the operators and the Government. First, the rail operators have ramped up their operations and maintenance to support the much higher level of reliability. Between 2016 and 2017, the total cost of running the rail network has increased by around $270 million. As the fares paid by commuters do not cover operating costs, the rail companies are operating at a loss. In the latest reported financial year, SMRT Trains incurred a loss of $86 million. SBS Transit’s train division also lost tens of millions of dollars.

5.     Second, the government has spent around $1.9 billion to take over ownership of all rail operating assets. While the $1.9 billion is once-off, the government is now also responsible for the proper and timely renewal of these assets, and this is a huge and continuing financial liability. Under the rail financing framework, the government pays for the full upfront cost of civil infrastructure, and the first set of operating assets. The subsequent operations and maintenance of operating assets are supposed to be fully paid for by the operators, through the collection of fares and non-fare revenue such as advertising. The depreciation cost of operating assets is supposed to be largely recovered by the government through licence charges.

6.     But in practice, as fares have been inadequate to cover the cost of operations, government subsidies have exceeded their intended scope of funding the civil infrastructure and the first set of operating assets. With intensified maintenance to reach the current level of reliability, the government operating subsidies have increased further. Over the next 5 years, the government expects to spend $4.5 billion on operating subsidies, so this is nearly $1 billion a year. And this will be on top of the government spending of $25 billion on civil infrastructure, to build and to equip new lines.

7.     LTA and the rail operators are working closely to keep costs under control. We are redesigning our systems and processes. For example, LTA is using its asset renewal programme to install new technologies, such as condition monitoring sensors. For new MRT lines like the Jurong Region Line, LTA is actively engaging the rail operators upstream on the design of the system, to ensure that it is designed and built with efficient downstream operations and maintenance in mind. The rail operators are also pooling their engineering and maintenance capabilities and collaborating with ST Engineering to cut out duplication and to raise productivity. All these upstream interventions are necessary, but they will not fully offset the higher costs of operating and maintaining a highly reliable rail network.

8.     You may ask, why fares fell below operating cost? PTC’s fare formula is supposed to keep fares in line with macroeconomic cost factors, such as inflation, wages, fuel costs, and increases in the network capacity, with a productivity extraction. But until recently, the PTC fare adjustments were not fully implemented. If we had strictly followed PTC’s fare formula, the operators would have been better able to cover the costs of the intensified maintenance. As it is, the additional costs have been partly covered by increased government subsidy and partly absorbed by the operators who have been incurring substantial losses. So this is clearly not sustainable.

9.     PTC’s current fare formula is valid until 2023. We will continue to operate under this formula. But we must have the discipline to implement the formula fully, as we adjust fares over the next 4 years. And in due course, the PTC will need to review the fare adjustment mechanism to reflect the increased operating cost to support the intensified maintenance, and the additional operating subsidies from the government to the MRT system. Meanwhile, government will provide the operators with a temporary enhanced maintenance grant. The details are being worked out between MOT and MOF.

10.    Mr Speaker, we have stabilised our MRT service. But we have to sustain these efforts over the long term, in order to prevent problems from gradually building up again. This requires discipline: on the operating side to ensure that LTA and operators invest in upgrades and preventive maintenance of the rail system long before problems become apparent and serious, and on the commuter side to implement regular fare adjustments to keep the rail system financially viable and government subsidies under control, so that we can sustain a high quality and affordable public transport network. We have entrusted the important task of fare review to the PTC and they will be fair to commuters, taxpayers and operators. I seek the Members’ full support for the PTC as and when they make recommendations on transport fare adjustments.