Due to significant cost increases, including an unprecedented rise in fuel costs, SBS Transit has applied to the Public Transport Council (PTC) for bus and rail fare adjustments.
The application is in line with the new formula recommended by the Fare Review Mechanism Committee. Based on a change in Consumer Price Index of 1.7% and Wage Index of 3.6%, the formula allows for fares to increase by a maximum of 2.4% this year.
The move to seek a fare adjustment was taken after much deliberation by the company. We are aware that fare adjustments impact a large part of the commuting public and weighed that heavily against the fact that costs have been rising dramatically in the last couple of years. In the end, the financial impact of the rising costs proved too significant. We therefore had to submit an application to the PTC for a small fare adjustment. But while we have done so, we have also been mindful of the needs of certain segments of the population; namely the poor and needy, and families with school-going children. We were also particularly careful to address the issue of an ageing population by taking into consideration the needs of the senior citizens in our application. As far as possible, we did not want any fare adjustment to affect these groups in a negative way. As a result, our fare application reflected these concerns.
SBS Transit, which runs buses, the North-East Line, and Punggol and Sengkang LRT systems, has been holding off fare applications for two years running.
In 2003, we decided against applying for a fare increase because of the economic uncertainties brought about by the SARS outbreak and the Iraqi war. Last year, we again refrained from applying for a fare hike despite a general sense of optimism because we felt that economic growth was just beginning to take root.
This year, significant increases in fuel costs coupled with upward pressures on salaries and the continued absorption of the Goods and Services Tax (GST), have made it difficult for us to continue holding off an application. Fuel costs for buses alone have risen from $39 million in 2002 to $55 million last year. Oil prices, which started off last year at about US$33 a barrel, have been rising strongly and is now trading in the region of US$50. In addition, we have continued to absorb the GST, including the 2-percentage point increase over the last two years, adding on some $11 million annually to our tax bill. There has also been upward pressure on wages with a stronger economy and in line with recommendations of the National Wage Council.
To hold off fare applications, SBS Transit has been looking for ways to increase revenue, improve productivity and cut operating costs. For example, in the last two years, we reduced our spare bus and spare bus captain pool. We also streamlined our bus operations such that they now operate from two districts instead of three previously. Efforts were also made to increase the fuel efficiency of our buses. Rail maintenance works, some of which were previously outsourced, were also brought in-house when the systems had stabilised and in-house resources could maintain them more cost-effectively. Nevertheless, despite our numerous efforts, the total operating costs for bus and rail operations rose from $510 million in 2002 to $546 million in 2004.
SBS Transit Executive Director, Mr Ong Boon Leong, said: “SBS Transit is committed to providing a public transport service that is affordable to all commuters in Singapore. Indeed, over the years, affordability has improved. Expenditure on bus and train services has generally been trending downwards as a proportion of household income. At SBS Transit, we will continue to strive for low cost leadership and operational excellence to ensure we provide a good level of service to our commuters while keeping cost low.
“We would have liked to hold off a fare application this year again. But the increasing cost of operations coupled with the need to replace buses have made it difficult. Nevertheless, we have, in this application, taken into consideration the poor and needy, families with school-going children and senior citizens. Subject to the approval of the PTC, our proposed adjustments may even benefit some of these commuters.”
More details of the application, which is subject to the approval of the PTC, will be announced at a later date.