TO avoid large swings in fares for passengers who take the bus and train, the way that yearly adjustments to public transport fares are calculated for the next five years has been changed.

Announcing the new fare adjustment formula on Tuesday (Apr 25), the Public Transport Council (PTC) said that passenger demand has been taken out of the equation, given the continued uncertainty over the pace and extent of the recovery in public transport ridership post-Covid-19.

The new formula that will be applied from 2023 to 2027 will not use the existing network capacity factor (NCF), which reflects operating costs due to network capacity changes relative to ridership.

Instead, the NCF will be replaced by a fixed “capacity adjustment factor” of 1.1 per cent each year to account for costs related to the expansion of the public transport system.

This fixed component is based on the actual and planned capacity improvements to the public transport network here from 2020 to 2026, and largely reflects the improved connectivity and lower journey times arising from the opening of the Thomson-East Coast Line, the PTC added.

The council was tasked in August 2022 with reviewing the fare adjustment formula to account for changes in commuting patterns, and to balance fare affordability and the financial sustainability of the public transport sector.

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Such reviews typically take place every five years. The PTC had formed a 10-member workgroup to conduct the latest review.

After engaging with commuters in several focus groups and consulting widely with academics, public transport operators and the National Transport Workers’ Union, the PTC said that it decided to retain three of the five components that make up the fare formula.

These are the components that reflect year-on-year changes in core inflation, wages and energy prices.

The PTC said that replacing the NCF with the fixed capacity adjustment factor will reduce volatility resulting from changes to public transport capacity and ridership.

The NCF previously ranged from 1.6 per cent to 3.9 per cent before the Covid-19 pandemic struck.

But it was excluded from fare adjustment calculations from February 2020 onwards, as a sharp drop in ridership led to a corresponding spike in the NCF value.

If the NCF had been computed as per normal for the 2021 fare review, it alone would have led to a 60-cent increase in fares, the PTC added. The council excluded the NCF from the 2022 review.

While public transport ridership has reached 90 per cent of pre-Covid-19 levels in January 2023, the PTC noted that travel patterns have yet to stabilise because of changes to work practices.

“The final impact on ridership, the typical distance travelled per journey and fare revenue per journey remains unclear,” the council said in a report on the fare formula review.

“NCF was not designed to track short–term exceptional fluctuations in demand and supply such as during the Covid-19 pandemic,” it pointed out. “To better cope with any future unexpected volatility in ridership, the workgroup recommends replacing NCF with a capacity adjustment factor.”

The PTC has also opted to retain a mechanism that allows it to defer fare adjustments to subsequent fare reviews, taking into consideration social and economic conditions.

This helps to moderate the impact of fare increases on affordability in extenuating circumstances, such as the Covid-19 pandemic, or due to large spikes in energy prices as was the case in the 2022 fare review exercise, it said. Last year, the PTC granted a fare increase of 2.9 per cent and rolled over 10.6 per cent to the 2023 exercise.

“The PTC is mindful that deferred fare increases require additional government subsidies to be provided, and hence should be exercised judiciously,” the council said. The Government currently provides more than S$2 billion in public transport subsidies a year.

PTC chairman Janet Ang told reporters at a press conference on Tuesday that the latest fare formula review was a timely but challenging one.

“On the one hand, we are faced with inflation at a 14-year-high, volatile energy prices, rising manpower costs, while ridership post-Covid-19 remains unclear. Meanwhile, continuous enhancements are being made to the public transport system,” she explained.

“Taken as a whole, the recommendations will allow the fare adjustment formula and mechanism to better respond to the macroeconomics and operating environment, keeping the public transport system financially sustainable,” Ms Ang added.

In a statement, the Ministry of Transport said that the Government has accepted the PTC’s proposed fare formula and recommendations.

Transport Minister S Iswaran said that the PTC recommendations aim to maintain the balance between fare affordability and the financial sustainability of the public transport system, and help reduce volatility for both public transport operators and commuters. THE STRAITS TIMES