Impact on Public Transport Operators' Viability and on Commuters when Recommended Fare Increases are Deferred

1 Mr Saktiandi Supaat asked the Minister for Transport following the Fare Review Exercise 2024 (a) what is the estimated financial impact on public transport operators and the overall sustainability of the public transport system from deferring the maximum allowable quantum for fares; (b) how will the deferment of the remaining quantum affect the funding available for planned service improvements or infrastructure projects; (c) what is the Ministry’s assessment of potential scenarios for fare adjustments in the next review; and (d) whether there will be a continued phased approach.

2 Mr Neil Parekh Nimil Rajnikant asked the Minister for Transport (a) what are the reasons that led the Public Transport Council to recommend a fare revision for bus and train fares to take effect at the end of December 2024; (b) what steps have the transport operators taken thus far to improve their service levels to commuters in light of fare revisions in the last three to five years; and (c) what are the big-ticket cost factors that the public transport operators have to watch closely in their operations.

3 Mr Saktiandi Supaat asked the Minister for Transport (a) whether there are projections or analyses on how the cumulative fare adjustments recommended by the Public Transport Council for the past three years and in this year's review, will impact the cost burden on average commuters compared to past adjustments for different income groups; and (b) how does the Ministry assess the value of each Public Transport Voucher (PTV) in the current and future exercises to ensure fare adjustments remain fair and manageable for all commuters, especially lower-income households.

The Minister for Transport (Mr Chee Hong Tat): Mr Speaker, may I have your permission to take Question Nos 1 to 3 on today's Order Paper together?

Mr Speaker: Yes, go ahead.

Mr Chee Hong Tat: Thank you, Sir. I will also be addressing a related question filed by Ms Poh Li San at an earlier Sitting.

Mr Speaker, in setting public transport fares, the Public Transport Council (PTC) aims to keep fares affordable for commuters, while ensuring that our public transport system remains financially sustainable. In deciding on the fare adjustment to implement each year, PTC is guided by the fare adjustment formula, while also taking into consideration economic and social factors such as fare affordability, rising costs faced by both the public and the public transport industry, and the current economic climate.

Sir, providing a safe, reliable and resilient public transport system is a key priority for the Ministry of Transport (MOT), Land Transport Authority (LTA) and PTC. This includes working with the public transport operators and unions to keep up service and reliability levels for the benefit of commuters. LTA has put in place different measures to hold the operators accountable for meeting their service and reliability standards. For example, by imposing penalties for lapses and setting incentives for good performance. So, there are carrots and sticks within the system to incentivise the rail and bus operators to maintain high service and reliability standards, without directly using the fare review exercise to achieve this outcome.

Mr Neil Parekh asked how PTC arrived at its decision for this year’s fare review exercise. For this year’s exercise, the output from the fare adjustment formula is 3.3%, driven by core inflation and wage growth in 2023 and partially moderated by a decrease in energy prices from a peak in 2022. After adding the deferred quantum of 15.6% from last year, the maximum allowable fare adjustment quantum is 18.9%.

Similar to the 2023 fare review exercise, PTC decided to raise fares by 6%, which is less than one-third of the maximum quantum, to keep fares affordable for commuters, while ensuring that the public transport system remains financially sustainable. The fare adjustment will be implemented in end December, similar to previous years.

Ms Poh Li San asked about fare increases in other cities. Different cities have different fare structures and revenue models, including having public transport operators that rely heavily on non-fare business such as property development and management of retail spaces, to supplement their income. We have seen some cities like Hong Kong and London that have adjusted their fares each year, while other cities like Seoul took a different approach, where they did not adjust fares for many years before making significant increases over the past one to two years to account for higher operating costs.

In Singapore, PTC has taken the approach of ensuring that fare adjustments are gradual so that the impact on commuters is more manageable. To Mr Saktiandi’s question on the impact of fare adjustments on affordability, PTC monitors this using the Public Transport Affordability Indicator, which measures the proportion of household income spent on public transport. For lower-income households, this proportion has fallen from 3.1% in 2014 to 2.4% in 2023. For average public transport users, the figure has also reduced from 2.2% in 2014 to 1.7% in 2023. These proportions are expected to remain similar for 2024.

The Government supports PTC’s approach. This is why we will provide about $250 million of additional subsidies in the coming year to cover the funding gap arising from the deferred fare adjustment quantum of 12.9%. This commitment by the Government gave PTC the assurance to grant a smaller fare increase to mitigate the impact on commuters, knowing that the higher costs of providing public transport has been accounted for.

The $250 million is in addition to the $2 billion annual subsidies to fund bus and train services as well as the additional funding of up to $900 million over eight years for the Bus Connectivity Enhancement Programme. To Mr Saktiandi and Ms Poh Li San’s questions, these additional subsidies will ensure the financial viability of the operators, and that service standards, including any planned service improvements in response to changing demand, are not compromised. In addition, the cost of public transport infrastructure development is also fully funded by Government, so any expansion or renewal plans are not affected by PTC’s decision on fares.

While the Government has stepped in to provide additional subsidies to cover the deferred fare quantum these few years to help moderate the impact of fare increase on commuters, we need to recognise that these subsidies are ultimately borne by current and future generations of taxpayers. We should therefore gradually close the gap over time where possible, which is what PTC is doing for this year’s fare review. PTC has also signalled that it intends to continue taking a gradual approach to future adjustments, to mitigate the impact on commuters.

Mr Speaker, in years when there are fare increases, the Government makes available Public Transport Vouchers (PTVs) to help cushion the impact on lower-income households. Our principle is for PTVs to help defray a part of the fare increase for lower-income households. The Government understands Singaporeans’ concerns about costs of living. That is why we revised the income eligibility criterion this year, from monthly household income per person of $1,600 to $1,800. This allows 60,000 more households to qualify for a PTV this exercise. We have also increased the PTV amount from $50 in 2023, to $60 this year. This will cover about six months of the fare increase for lower-income households.

Over the past decade, we have steadily improved the accessibility, inclusivity and quality of our public transport system. These outcomes have been achieved through a strong tripartite partnership between the Government, operators and workers, to manage cost while enhancing service and reliability, so that fares can be kept affordable and the public transport system remains financially sustainable. Sir, this will continue to be our approach going forward.

Mr Speaker: Mr Saktiandi Supaat.

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Speaker, I would like to thank the Minister for his answers to my Question Nos 1 and 3. I have one supplementary question. But first of all, I would like to thank the Minister for the occasional PTV help to vulnerable residents in Singapore. I note that he highlighted that the quantum of the CPI for household payments for public transport for vulnerable households has dropped from 3.2% to 2.4%, if I caught it correctly. I note also in the CPI basket, the public road transport CPI weightage is about 3%.

My question in terms of the supplementary question is, with regards to the PTVs, can I ask the Minister how is this quantum decided upon, in terms of the size and also the amount, $50 to $60, that he highlighted – and I applaud that. And thank you for increasing the income cut-off from $1,500 to $1,800.

My question is, how is the quantum decided? Whether in the future, can the PTV quantum be included within the overall Budget deliberation, rather than on an ad hoc basis?

I do note that the payment to alleviate the impact on households for public transport expenditure is a move that is much to be thanked for.

Mr Chee Hong Tat: Mr Speaker, I would like to first clarify that the PTV was adjusted, the criterion was adjusted from a per capita household income of $1,600 to $1,800. The quantum was increased from $50 last year, to $60 this year.

Mr Saktiandi asked how we size up the quantum and how we size up the criterion. This is something that we will look at from time to time. Every time we do an exercise, we will take a look and see what is the coverage and what is the amount that we can provide to help to defray and mitigate, in this case, six months of the increase in fares for lower-income households.

We also build into the application process some flexibility, because we understand there are some households where there may be more household members; so, they may need more than one PTV. We do have this flexibility. They can appeal through the grassroots network and additional PTVs can be given to help these households with more family members.

The timing that Mr Saktiandi asked about, why not do it as part of Budget? Sir, I think this depends on the timing of the two exercises because when we do the fare review, it is a little bit later. And when we decide on the PTVs, we first have to see what PTC recommends as the fare increase. Then, we can size up the PTV accordingly.