New Public Bus Contracting Model – Fares to be adjusted regularly

Now you have it, bus fares have to be adjusted regularly when the government moves from the current privatised model to the new Government Contracting Model.

In my earlier posts, I had been saying that SMRT and SBS Transit could not go on with losses from their bus operations without fare increases. The operating losses from bus businesses of both publicly listed companies for recent two years are shown below.

Bus business y/e Dec 2013 or Mar 2014 Y/e 2012 or 2013
SBS Transit Loss $14.3 m Loss $14.7 m
SMRT Loss $28.3 m Loss $31.7 m

Minister for Transport was quoted in the Straits Times to say, “in the seven years from 2005 to 2012, fares went up by an average of 0.3% each year but wage increases and fuel costs were much higher.” This was precisely the reason why losses in bus operations were seen in both SBS Transit and SMRT (Bus segment).

During the parliamentary sitting of 7 July 2014, Minister for Transport commenting on the new Government Contracting Model said, “… regular fare adjustments are still necessary to ensure the overall financial sustainability of the public transport system.” The proportion of future fare increases to be borne by commuters would depend also on how much subsidies the government is giving to reduce impact on the commuters.

Under this new model, the government collects the fare revenues and pays transport operators to operate the routes. The shortfall between the two figures has to be covered either by fare increases or government subsidies.

With the government collecting fare revenue in the new model, it becomes imperative that the government public account must bear any shortfall between revenues and costs. The table would be turned from publicly listed bus companies bearing losses of operations to the government accounting for shortfalls in the new contracting model.

Copyright © 2014, limkimtong for Living Investment

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