Thursday, April 22, 2010

Public Transport Fare Changes

The PTC had just announced an overall reduction of 2.5% in public transport fares, in accordance to the fare formula. The adjustment to public transport fares is implemented together with a change in fare structure to that of “Distance Fare” structure. Under the new fare structure, “Commuters travelling the same distance will pay the same fare for the same type of service, whether they travel direct or make transfers.” (PTC Press Release http://www.ptc.gov.sg/QoSnFares/doc/Fare_revision_2010_news_release.pdf , para 6)

Saliant features of the new bus fare structure compared to the current:
1) Adult fares - increased rates for both minimum and maximum fares, but transfer penalty removed. So those taking direct buses pay more, but those who transfer pay less than before.
2) Senior Citizen and children - those who travel short distances or transfer pay less, those who travel long distances pay more


Recall the announcement made by Second Minister for Transport Lim Hwee Hua on 28 Mar 10 on the “review” of long distance bus services and the pieces start to fall into place.

According to the fare formula*, the fares must be reduced by a minimum* of 2.5%.

So if I have to reduce fares by 2.5%, and I want to cut down on long distance bus services, how can I implement these two measures in the best possible way?

Let us assume for illustration’s sake that one third of the public transport users use the long distance bus services (Group A), while the other two-thirds (Group B) travel short distances or make transfers.

Option 1:
Stage 1:
Reduce all fares by 2.5% across the board. All are happy.

Stage 2:
Remove long distance bus services and the people in Group A cry foul over the increase in bus fares and inconvenience due to transfers. Public sympathy is probably on the side of the affected users.

Option 2:
Stage 1:
Introduce a new fare structure such that
(i) fares are the same regardless of whether users travel direct or make transfers
(ii) the fares for Group A increases, but that for Group B decreases in such a way that overall loss in revenue is still 2.5%.
Being reasonable people who recognize that sometimes policy changes benefit others at their own expense, and since two-thirds of the public transport users benefit, Group A is silent / muted over their own increased costs. Group B is happy.

Stage 2:
Remove long distance bus services. Group A may be unhappy over the inconvenience, but can’t cry foul over increased cost because there is none at this stage. The cost increase had already been done in stage 1.

Well, excellent manoeuvering. Despite knowing what is coming, there is no way out. My sympathies to group A.

But then again, perhaps I am being paranoid. Perhaps the removal of long distance bus services will not happen and this change in fare structure has nothing to do with that.

For, according to the Press Release, Mr Gerard Ee, Chairman of the PTC, said, “With the new fare structure, commuters will have more choices and greater flexibility to decide on the best route to reach their destination and can choose to make transfers without being penalised. For example, instead of waiting for a direct bus, a commuter can hop on to the first bus that comes along and make other bus/rail transfers along the route, thereby shortening their total journey time.”

So you see, we are going to have “choices” of direct buses or transfers.

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Footnote:

* Maximum fare adjustment = Price Index – 1.5%
Price Index = 0.5CPI + 0.5WI; 1.5%: productivity extraction set for 2008 to 2012.
CPI: the change in Consumer Price Index over preceding year
CPI = 0.6% in 2009.

Wage Index (WI): 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
WI = -2.6% in 2009.

According to this formula, maximum fare adjustment = -2.5%, i.e. fare adjustment
should be -2.5% or below. Hence, 2.5% reduction is the minimum reduction required, not maximum reduction allowed as a statement on the PTC website (http://www.ptc.gov.sg/QoSnFares/fr_overview.html) seem to imply. Somebody should correct that misleading statement. Unless the PTC mistakenly believed 2.5% to be the maximum reduction allowed by the formula, in which case it is quite worrying.

4 comments:

  1. I have the impression (from other articles) that the 2.5% savings value is obtained by surveying commuters. If so, the value is very small. One must survey a huge number of commuters to get an accurate figure. The survey would also be biased according to location. If conducted at the terminals, most commuters would be transfer passengers, so they would report savings.

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  2. A flat rate should be impose instead to be fair to all commuters.

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  3. May i ask how the formula is derived? cos it seems weird that if the maximum adjustment is indeed -2.5%, theoretically it could be -100% isnt it?

    Also, if the price index>1.5% does it mean that fares should be revised upwards?

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  4. To Anon at 12:27,
    The formula was set by a committee appointed by the Govt to set the maximum increase allowed for public transport (PT) fares. PT companies submit their proposed changes in fares to the PTC for approval, and the PTC uses this formula to cap the proposed increase. So yes, theoretically the adjustment could be -100% in that it does not violate the formula, but PT companies are not likely to apply to the PTC to seek a -100% adjustment. If the price index is 1.5%, then the PT companies can go to PTC to seek increases in fares of up to 1.5%.

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