Equity, clarity in public transport fares, at last

When the latest adjustment to public transport fares kicks in on Dec 30, commuters will see their travel expenses fall significantly.

They will also say goodbye to confusing price differences between bus and train fares and between fares on old and new MRT lines.

Those differences have, for too long, pushed commuters to choose their mode of travel based on price.

The Dec 30 adjustment is a profound change that brings more equity and clarity to users, and gives true meaning to distance fare which was introduced six years ago.

The Public Transport Council (PTC) announced the shift last month, along with an overall 4.2 per cent cut in fare rates.

It said fares will be calculated based on the shortest path between the start and the end of a journey, and not on the fastest travel path.

More crucially, it said bus and train fares will be harmonised.

Regular trunk bus fares will range from 77 cents to $2.02, as will LRT and MRT fares - no matter whether they are overground or underground.

For the last 13 years, rail operators have been allowed to charge up to 25 cents more for rides on newer, underground lines.

The PTC had argued back then that these lines, being underground, were costlier to run because of elements such as air-conditioning and lighting.

That has never been a strong argument, as all these lines are driverless, and manpower is an operator's single biggest cost component.

The fare disparity - introduced since the North-East MRT Line started running in 2003 - has been a bugbear of many commuters.

Someone who uses a newer line daily could end up paying $200 more a year than someone who uses an older line.

The difference may not be huge for middle-income earners, but it is a barrier to those who earn less.

The shift to harmonise fares will, thus, remove this barrier, allowing for a swifter lightening of load on the older and overburdened lines.

This is of national significance.

It would be tragic if Singapore spent tens of billions to build new MRT lines but their ridership potential remained unfulfilled for decades to come because fares were just not right.

If that happened, nobody wins - not even operators of newer lines.

The change also paves the way for a simpler policy which people can understand.

The current regime gives rise to complex and convoluted principles which the man in the street cannot grasp.

An example of this was seen in January, when Holland-Bukit Timah GRC MP Liang Eng Hwa asked in Parliament why Downtown Line fares along a certain stretch were exceptionally high.

Transport Minister Khaw Boon Wan replied, saying it was because the PTC wanted to ensure that senior citizens and the disabled do not pay more than what they would on an older line.

The new line, Mr Khaw said, runs roughly parallel to the older North-South Line, where fares for the two groups are capped at 88 cents instead of 92 cents for newer lines.

The PTC thus applied the fare structure of the North-South Line so that senior and disabled commuters will continue to enjoy the 88-cent cap on journeys between stations.

But as the actual distance of such a trip on the older line is longer than that on the Downtown Line, other commuters end up paying more as the fare structure of the older line applies to them.

Such an anomalous outcome may hold some logic, but it is not intuitive and not easy to appreciate.

That goes away with the fare harmonisation exercise.

Still, eight exceptions will remain (down from 1,500 today) because the PTC wants to ensure that every commuter enjoys a fare reduction.

For example, a commuter going from Queenstown to Orchard MRT currently pays $1.24.

Based on the distance between these two stations, he could have been charged $1.29 from Dec 30.

Instead, he will pay $1.23. The PTC says it aims to remove all such exceptions in the future.

In any case, reducing the number from 1,500 to eight is commendable.

The change, however, will have an immediate adverse impact on operators' profits.

SBS Transit, which operates the North-East Line, could bear the brunt of it.

This is because SMRT has migrated to the New Rail Financing Framework (NRFF), which partly shields an operator from a profit plunge.

This is where a rail-contracting model will be useful.

The Government announced two weeks ago that such an operating model will apply to the upcoming Thomson-East Coast Line (TEL).

Identical to the bus-contracting model rolled out last year, operators will be paid fixed sums (the amount which they bid for) to run services for a period of time.

The Government collects fare revenue, while the operator focuses on meeting service quality standards.

The operating contract for the TEL will run for nine years, with a possible extension of two.

After that, when ridership is expected to be more stable, the Government will revert to the NRFF.

Ideally, all the rail lines should be operated under a contracting model, just like buses.

That simplifies things. Otherwise, there might be three rail operating models when the TEL opens in stages from 2019 - a contracting model, NRFF and the current asset-heavy long-tenure model which SBS Transit is under.

As fares will, at long last, be harmonised from Dec 30, it will make sense for operating models to go the same route.

Otherwise, we might end up having to make other exceptions in the future.

This article was first published on November 21, 2016.
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