Surge pricing 'likely to push up peak fares'

Surge pricing 'likely to push up peak fares'
PHOTO: The Straits Times

The taxi industry should be allowed to innovate and adapt to new market conditions and competition, Second Minister for Transport Ng Chee Meng told Parliament yesterday.

Mr Ng's comments were a strong hint that taxi companies would soon get the go-ahead to use dynamic pricing as another option for booked trips.

ComfortDelGro, which controls over 60 per cent of cabs here, told the Public Transport Council (PTC) last week of its plan to introduce dynamic, or surge, pricing - similar to that used by third-party car hailing companies Uber and Grab.

Trans-Cab, Premier Taxi and Prime Taxi have also informed the PTC of similar plans.

Read also: Trans-Cab, Premier Taxi plan to use surge pricing

The PTC is in discussion with the taxi companies, said Mr Ng.

Chua Chu Kang GRC MP Zaqy Mohamed said commuters are now faced with a "double whammy" of fare uncertainty and taxi availability.

Read also: 'Dynamic fares' in the works at 4 taxi companies: What you need to know

Pointing out that the Taxi Availability framework, which requires taxi companies to clock a minimum daily mileage, was scraped last year, he asked: "How can the ministry ensure that the public will be adequately served?"

Mr Ng said he understood some commuters' concerns about dynamic pricing but said they would know exactly how much their fare would be and can choose to accept or decline.

"The taxi companies, I understand, intend to retain the traditional metered fare system even as they introduce dynamic pricing. But ultimately, taxi companies should ensure that dynamic pricing improves, and not worsens the matching of supply to demand," he said.

Read also: Grab set to provide fixed upfront fares for booking cabs

Transport experts think that surge pricing, which kicks in only when demand is high, will likely push up taxi fares, especially during peak periods.

SIM University economist Walter Theseira said: "Demand would probably be higher during peak periods, where there are currently surcharges.

"While it depends whether taxi companies can comfortably meet demand during these periods, it is unlikely they would want to bring down the current prices."

He is concerned that elderly people who do not know how to use apps to get a taxi might find it more difficult to hail one on the street.

UniSIM adjunct associate professor Dr Park Byung Joon, a transport expert, also thinks that fares are likely to go up.

He said: "During non-peak periods, private hire cars are only slightly cheaper than taxis, but they can be much more expensive during high demand.

"If you average it out, it would probably be more expensive for taxis using surge pricing."

Government Parliamentary Committee for Transport chairman Sitoh Yih Pin said technology had disrupted the industry and provided more options and value for commuters, but he also highlighted the difficulties faced by taxi drivers.

He added: "I do not advocate protectionist policies for our taxis. But in a reasonably short period, three events and their corresponding policies are likely to have repercussions on the livelihoods of taxi drivers.

"They are the entry of private hire cars, the restructuring of diesel tax and the push for automated driverless cars."


This article was first published on Mar 09, 2017.
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