Use cost index to set cab fares

THE Land Transport Authority (LTA) recently announced new rules to harmonise taxi fares ("New rules seek to simplify taxi fares"; April 1).

The objectives are to ensure the viability of a high-quality taxi industry; innovation to meet competitive challenges, such as new business models like ride-sharing service Uber; and improvements to our regulated taxis as a safe and reliable mode of transport.

To achieve these objectives, the following are some ideas the LTA could consider:

A transparent cost index formula for regular annual adjustments of taxi fares, for both standard rates and surcharges.

The fare adjustments should be reviewed at the same time annually based on changes in industry costs, such as fuel, insurance and certificates of entitlement.

Offering passengers a true shared ride option to increase reliability and reduce fares.

At the option of the driver and with the consent of passengers, a flat rate - of say $8 per passenger - can be proposed for two or more passengers sharing a taxi for part of a trip.

This offers passengers a lower rate, while earning the driver more than the average trip.

It also increases taxi capacity to handle late-night or peak taxi demand.

Improved passenger safety and taxi driver behaviour through better regulatory oversight, by providing online access to vehicle and driver records.

This could be done using systems that collect and report taxi trip information in real time.

Data systems could also analyse taxi companies' performance according to how they meet certain availability/reliability standards.

By implementing some of the above ideas, passengers can enjoy safer and more reliable taxi services.

For taxi drivers, the fare increases based on a cost index formula will ensure that their incomes rise in a well-defined manner.

For taxi companies, the cost index will provide assurance that taxi rates will be responsive to price increases and help ensure the financial sustainability of the taxi industry.

Transparency will be essential to how the public views the method used to set fares.

This article was first published on Apr 9, 2015.
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