Follow us on Telegram for the latest updates: https://t.me/mothershipsg

The Public Transport Council (PTC) has revealed its proposed fare adjustment formula for 2023 to 2027.

The formula pegged to economic factors such as consumer prices, wages and energy costs will largely remain the same as the previous 5-year formula.

In the press conference on Apr. 25, 2023, PTC announced they would retain the Deferred Fare Adjustment mechanism from previous years.

Under the mechanism, PTC "has the discretion to defer the fare adjustment quantum, in part or in full, to subsequent Fare Review Exercises (FRE), taking into consideration the prevailing social and economic conditions".

PTC Chairperson Janet Ang, who is a Nominated Member of Parliament confirmed with reporters that the 10.6 per cent fare increase deferred from last year would be considered in this year's FRE.

However, they will make the "appropriate adjustments" based on the "economic and social situation" then.

"The only thing I won't be afraid to say is that it won't be negative," she added.

The new formula

The new formula:

The ratio of the individual economic factors for the Price Index is kept the same from the previous formula, which considers the changing operational costs of the public transport companies, such as staff wages, fuel costs and maintenance of assets.

PTC replaced "Productivity Extraction" (PE) with "Productivity Contribution" (PC) and "Network Capacity Factor" (NCF) with "Capacity Adjustment Factor" (C).

"Productivity contribution"

PE was initially introduced in 2005 to factor in the productivity gains of public transport operators.

This means that if the operators are "productive", such as being more cost-efficient, the "savings" will turn into a "discount" for commuters.

PE was set at 0.1 per cent in the formula review in 2018, based on half of the productivity savings realised by the operators between 2012 and 2016.

However, as the pandemic occurred during the latest period of 2017 to 2021, operators instead had productivity losses as ridership fell during the period, which was offset by the "substantial funding support" from the government.

PTC explained that as "it is important for the public transport operators to be cost-efficient and to drive continuous productivity improvements", they decided to set PC at 0.1 per cent.

"Capacity adjustment factor"

In 2018, NCF was included to track price changes influenced by public transport capacity changes relative to commuter demand.

It considered "recurrent operating costs due to capacity adjustments", such as running new MRT lines and buses and the increased frequency of such services.

However, it was not designed to track short-term fluctuations in demand and supply during the pandemic, resulting in significantly higher NCF values.

The NCF values were 3 per cent, 1.6 per cent and 3.9 per cent from 2018 to 2020.

However, due to volatile ridership figures during the pandemic, the NFC reached 50 per cent for the 2021 FRE.

The PTC did not factor the full value into the fare adjustment for that year and decided to set it at 0.7 per cent for 2021 and 0 per cent in 2022.

For the next five years, PTC suggests using the new C instead, which will be fixed at 1.1 per cent.

The percentage is said to reflect the "improved connectivity and lower journey times" due to the opening of the Thomson-East Coast line.

What does this mean for fare increase

PTC explained that the review of the fare adjustment formula considered three major developments: inflation, uncertain ridership patterns and post-pandemic recovery, and continuous enhancements funded by the government.

The 10-member Workgroup said the revised formula aims to "reduce the volatility of fare changes while ensuring fare affordability for commuters and the financial sustainability" of Singapore's public transport.

After the formula change, with the NCF out of the question, the main variable factor for fare increases will be year-on-year economic factors.

Deferment of 10.6% will be considered in 2023 FRE

In last year's FRE, the formula calculated the fare adjustment to be 13.5 per cent, with the Energy Index contributing 11.7 per cent.

This prompted PTC to exercise their discretion to defer 10.6 per cent of the adjustment to future FREs. The government provided an additional S$200 million in subsidies in 2023 to enable this — on top of annual government subsidies of over S$2 billion.

Using the new formula, even considering the volatile Energy Index, which had once gone into the negative for 2021's FRE, with no inclusion of huge "discounts", the 10.6 per cent deferment will likely be a significant contributor.

There is still the possibility of PTC further deferring the fare increase to another year. However, it clarified in the press release they are "mindful that deferred fare increases require additional government subsidies to be provided, and hence should be exercised judiciously."

The proposed fare adjustment quantum will be finalised and announced in the second half of 2023.

Top image via Dave Kim/Unsplash