SINGAPORE’S public transport fare hikes reflect changes in general costs based on macroeconomic factors, including changes in core inflation, national wage growth and energy prices, and not operators’ actual costs, Acting Minister for Transport Chee Hong Tat reiterated on Tuesday (Oct 3).

“Operators cannot assume that their cost increases will be matched by correspondingly higher fares,” he noted.

As the Public Transport Council (PTC) considers national wage increases rather than actual salaries paid by operators, the sector’s salaries are kept competitive to attract and retain workers, he added.

“Wage increases that exceed changes in the national wage index will not be covered by the fare formula,” said Chee, adding that both have grown at a similar pace for the past five years.

The fare formula guides the PTC to judge how much of the allowable fare adjustments to implement, considering economic and social factors, such as measuring affordability by the estimated proportion of household income spent on public transport.

Chee noted that this has fallen to 2.4 per cent in 2022 for low income families, from 3.1 per cent in 2013. For average public transport users, this has shrunk to 1.7 per cent, from 2.2 per cent.

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The quantum of the allowable fare adjustment not implemented in a particular year is deferred and carried forward.

From Dec 23 this year, a 7 per cent increase in public transport fare will be implemented, out of the maximum allowable increase of 22.6 per cent. The government is providing S$300 million in additional subsidies, on top of the S$2 billion annual subsidies on bus and train services, to account for this funding gap, said the acting minister.

Asked by Members of Parliament whether the remaining 15.6 per cent fare increase deferred could be expunged, or whether future fare increases could be frozen, he said that the longer-term reliability and sustainability of the public transport system would be affected, as the increases reflect real cost increases that would not disappear, and the funding gap would grow.

It would require public transport operators to absorb these costs, or for taxpayers to bear a higher cost burden, for higher government subsidies on a permanent basis, he said.

Bus services – where the government collects fare revenues and pays operators a service fee based on competitive bids – operate at a loss overall, requiring about S$1 billion in subsidies every year. Expunging or freezing future increases would result in further losses and higher subsidies.

For rail services, where fares are collected by operators to cover operating costs, he noted: “In the latest financial year, after accounting for government grants, SBS Transit reported a loss of several million dollars for their rail operations, while SMRT Trains reported an operating profit of S$6 million, which represents a profit margin of less than 1 per cent.”

Workers’ Party MP Louis Chua, noting that the 7 per cent increase is “well above” Singapore’s inflation rates and the potential “snowballing effect” of further increases, asked if the rate hikes could be moderated, if not expunged.

In his response, Chee reiterated that the formula takes cost components other than inflation into consideration, adding: “We do want to consider the impact fully on the overall cost of living – and that’s why the PTC exercises judgment, and it’s not just driven by the formula.”