Transport fares unlikely to fall despite cheaper fuel

The fall in oil prices is not likely to lead to a reduction in public transport fares this year, said Transport Minister Lui Tuck Yew in Parliament yesterday, reported The Straits Times. The reason is that part of a fare increase due to take effect last year was delayed until this year, explained Mr. Lui. But fares next year may come down by around one percent as a result of cheaper energy.

In deciding on transport fare adjustments, the formula takes into account three factors: energy costs, core inflation and wages. The energy component accounts for 20 percent of the fare adjustment quantum, while core inflation and wages make up the rest. Going by the formula, the lower energy prices should result in a fare adjustment of -0.6 percent this year, said Mr. Lui.

While this suggests that fares should come down, it does not take into account the fare increase that was proposed in the previous review but not implemented.

Last January, the Public Transport Council (PTC) recommended fares to be raised by 6.6 percent. But only 3.2 percent of the increase was implemented, as raising fares by 6.6 percent in one go would be too much, said Mr. Lui. The outstanding 3.4 percent from last year would thus have to be factored into this year's fare adjustment. In doing so, the fare adjustment quantum for this year would be 2.8 percent, said Mr. Lui.

As for next year, Mr. Lui said the available data so far indicates the fare adjustment quantum "could be in the region of negative one percent". This means fares could come down.