HAWKER-turned-motor trader Neo Nam Heng is likely to become the next new taxi operator in Singapore.

Mr Neo, 51, managing director of Cheng Yong Credit, one of the first parallel importers here, has applied to the Land Transport Authority  for a taxi operating licence.

If the LTA awards him the licence, the newest player - in a market cabbies insist is overcrowded but commuters say suffers from a shortage of cabs - will be unlike any other taxi operator in Singapore.

This is because Mr Neo plans to operate an environmentally friendly fleet of taxis and charge drivers the lowest daily rental in town.

He is confident of securing the licence, and plans to start operating next month. The business will be run by Prime Leasing, a unit of Cheng Yong, which also operates a vehicle leasing and export business.

Prime Leasing plans to import petrol-driven cars such as the Honda Airwave, Honda Stream, Toyota Wish and Toyota Corolla station wagon, and modify them to run on compressed natural gas (CNG).

CNG cars are accorded a 40 per cent discount on additional registration fees (the main car tax) because they are deemed environmentally friendly. The tax break was to end this year, but the Government recently extended it to the end of 2009.

Hence, these 'green' taxis will cost $49,000 to $55,000 each (plus another $3,500 to modify it to run on CNG), compared with $65,000 to $90,000 for equivalent diesel cabs on the road. This will enable Prime Leasing to set taxi rentals at just $69 per day, versus the current industry average of $90.

He also said fares will be 'slightly cheaper', but gave no details.

'One thing is for sure, we will be a pro-driver company,' said Mr Neo, adding matter-of-factly that his father was a 'pirate taxi driver'. 'And we will have in place a scheme to make it very attractive for taxi drivers to join us.'

For instance, a cabby will get a lump sum reward equivalent to the residual tax value of the vehicle if he stays with Prime Leasing for five years continuously. That works out to about $11,000 for a Honda Airwave.

However, the cabby will have to put down a joining deposit of about $5,000.

Mr Neo will start with 500 taxis in the first year, and plans to increase this to 800 by the third.

If all goes well, Prime Leasing will be the fourth newcomer since the taxi industry was liberalised in 2003. It will compete head to head with established giants  ComfortDelGro and SMRT Corp, as well as newcomers Trans-Cab, Smart Taxis and Premier Taxi.

Asked if he is worried about getting enough drivers - a problem even the big players face - Mr Neo said: 'There are about 40,000 drivers in the market. I need only 2 per cent of that.'

He reckons his scheme will attract only good and hardworking drivers as it requires staying power and loyalty. 'Our rental is the cheapest in town,' he reiterated. 'And our cars are brand new.'

CNG is also an economically viable alternative to diesel.

Said Mr Johnny Harjantho, managing director of Smart Taxis: 'A 2 litre car running on CNG can cover 22km on $1. A 1.8 litre diesel-run car manages about 14km.'

Mr Harjantho is building Singapore's second CNG refuelling station. The new station in Mandai is expected to open in January next year.

Prime Leasing has already appointed CNG conversion specialist C. Melchers to modify the first few cars. A Honda Airwave has been done, while a Honda Stream and Toyota Wish will be completed soon.