Oral Reply by Minister for Transport Khaw Boon Wan to Parliamentary Question on New Fare Formula

Miss Cheng Li Hui asked the Minister for Transport 

a.     to what extent is the Network Capacity Factor able to address the widening gap between transport cost and fares;

b.     how will the revised fare formula affect low-income and elderly Singaporeans; and

c.     whether existing transport subsidy schemes for needy Singaporeans, such as concession holders who are Workfare Income Supplement recipients or senior citizens, will be reviewed or enhanced. 

Reply by Minister for Transport Khaw Boon Wan:

1.     The Public Transport Council (PTC) developed the fare formula to objectively track the changes in the running cost of our public transport operations. This helps inform their deliberations when they evaluate proposals from operators for fare changes, and decide on the annual fare recommendations.

2.     The running costs of public transport operators are affected by a number of factors, including the price and quantity of the resources deployed. For example, their expenditure on electricity in a particular year will depend on the quantity of electricity consumed during that year, and the prevailing electricity tariffs.  

3.     While the old fare formula adequately measured the changes in the price of resources consumed, it did not measure the changes in the quantity. When the capacity of the public transport network is quite stable from year to year, the limitation of the old fare formula is not material. However, as we aggressively expand the capacity of our public transport network, the inadequacy in the old fare formula will have a material impact on the sustainability of our public transport system. 

4.     In the last five years, we have added more than 1,000 new buses and 200 new trains to our public transport network. This has increased its capacity by around 25%. Over the same period, commuter demand increased by less than 10%. The limitation of the old fare formula has contributed to a widening gap between fare revenue and operating costs. So far, the yearly operating shortfall has been covered by Government subsidies. But, going forward, we need a fair way to take into account changes in the capacity of our public transport network relative to commuter demand. The Network Capacity Factor (NCF) may be positive or negative.  It will be positive where demand grows slower than capacity. Conversely, if capacity remains stagnant in a given year and demand grows faster than capacity, resulting in more crowded trains, the NCF will be negative. PTC designed the NCF to address the limitation in the old fare formula.  PTC’s mission is to ensure the long term sustainability of our public transport system, while keeping fares affordable. 

5.     Meanwhile, the Government will continue to bear the full development cost of public transport civil infrastructure. This is estimated to be around $20 billion over the next five years.  

6.     As for our public transport fares, the PTC will ensure that they remain affordable. Over the past decade, monthly expenditure on public transport as a proportion of household income for the lower income group has come down from 4.2% to 2.7%. The PTC will also continue to review and if necessary enhance concession schemes to provide targeted help for specific groups like senior citizens, low income individuals and persons with disabilities.