Since the Budget speech on 17 Feb 2012, REACH contributors have actively shared their views on the various announcements, including transport measures, which have been shared with the Ministry of Transport (MOT). One key concern is the co-funding of new bus fleets by the government, where the usage of public funds for private operators has been put to question.
Finance Minister Tharman Shanmugaratnam has made remarks on this topic in Parliament on 1 Mar 2012, which addresses contributors’ feedback on these areas. Here, we bring you MOT’s highlights from the Budget 2012 Round-Up Speech.
Expanding Bus Capacity: Highlights from Finance Minister Tharman Shanmugaratnam’s Round-Up Speech for Budget 2012
In his round-up speech, Finance Minister Tharman Shanmugaratnam explained that the Government’s one-time investment of $1.1 billion to increase bus capacity was the fastest way to reduce waiting times and crowding for commuters.
With the increased number of buses, commuters will enjoy less crowded buses on heavily utilised routes, experience shorter waiting times, and see a number of new bus services that will improve connectivity and provide more public transport choices.
Public transport operators are still responsible for expanding their bus fleets to cater to commuter growth on public transport, meeting mandatory service level requirements, and the funding of 250 additional buses.
The transport-related excerpt of Mr Shanmugaratnam's speech is as below:
$1.1 Billion Package to Expand Bus Capacity – Who Are We Subsidising?
Finally, Mr Speaker Sir, we come to the issue of why the government is taking the extraordinary step of spending $1.1 billion over 10 years to increase bus capacity.
Several MPs have asked about this, including Ms Amy Khor, Mr Seng Han Thong, Mr Lim Biow Chuan and Mr Pritam Singh. There are in particular questions on whether this is a subsidy to the transport operators and their shareholders.
The Government considered its investment to expand bus capacity very carefully. This was not a normal budgetary decision. It is an important step, to reduce waiting times and crowdedness that Singaporeans experience daily as they take public buses.
Let me start by explaining what the Public Transport Operators (PTOs) themselves are responsible for. The PTOs are required to expand their fleets, their bus fleets to cater to the growth in passenger numbers, as well as to ensure that they meet the service levels that are mandated under the existing regulatory framework. This is why, in addition to operating the existing bus fleet of about 4000 buses, they will have to buy 250 additional buses to achieve this; and they will fund this on their own.103. The Government is putting $1.1 billion into the bus system in order to step up bus service levels beyond the current service standards that are required of the PTOs.
- It will increase bus capacity on existing heavily-utilised routes making them less crowded and giving commuters a more pleasant journey.
- Almost all feeder buses will run every 10 minutes or less - for two hours in the morning, and the evening, two-hour peak periods instead of the current one-hour peak period as under the current service level requirements.
- Commuters on existing routes will thus benefit both from shorter waiting times and less crowded bus journeys.
- And a number of new bus services, in addition to existing bus services, will be added to improve connectivity, and provide commuters with more public transport choices.
- So these are improvements that commuters have been hoping for and waiting for.
As a condition for the Government's investment, the PTOs will have to deliver on these service level improvements, which go beyond existing regulatory requirements.
We cannot simply mandate that the PTOs add these 550 buses to improve service levels. First, because it goes significantly beyond the current service levels in the current regulatory framework. Second, the PTO‟s bus operations are already running operating losses, and the 550 additional buses in particular are projected to be a loss-making operation. The cost of acquiring and running the 550 buses is beyond what can be recovered from revenues in running the buses.
Take the example of improving the frequency of feeder bus services. Increasing the number of buses to make this possible will shorten waiting times but will add little to revenues, since the total number of passengers taking the service will remain largely the same. So more buses, more drivers, more fuel but no similar increase in revenues because it is essentially the same pool of passengers. They now have to wait shorter times and enjoy less crowded journeys, but it is essentially the same pool.
Without the Government stepping in, these significant service level improvements would only have been achievable if fares have been raised sharply. The 550 additional buses mean significantly higher costs - not only to purchase the buses, but also because more than 1000 drivers would need to be hired and paid a good wage, as Mr Seng Han Thong and NMP Mary Liew have pointed out. Fare revenues of the PTOs would have had to go up by about 12%-13% - which translates into an increase in passenger fares of about 15 cents per journey - if the PTOs had to achieve this on their own. How much is 12% - 13%? In the last 5 years since 2006, fares went up by 0.3%. So 12%-13% is quite a significant leap compared to what we have seen in the last 5 years. That would have been the only way which we could have achieved these service level improvements if the Government had not stepped in.
Hence the reality of the matter is that the $1.1 billion Government package, or $110 million per year, is a subsidy for public transport commuters, and not a subsidy for the PTOs. It will improve service levels for commuters, not the profits of the PTOs.
The $1.1 billion package is expected to cover the losses on the 550 buses - in other words, the additional costs net of revenues. Of the $1.1 billion package, $280 million is budgeted for the purchase of the 550 buses over the next five years, and $820 million to cover the net operating costs over the 10 years. This is based on the best estimates currently. However, we will be monitoring and scrutinising the PTOs‟ actual costs for both the purchase and running of the buses. Should their losses turn out to be lower than expected, the Government funding will be reduced correspondingly. So one way or another, there are no profits to be made from the 550 buses.
The $1.1 billion for additional buses complements the $60 billion we are putting into the expansion of the rail system. It will take several years for these new rail lines to come on stream or all of them to come on stream. That is why we are stepping in now to add bus capacity and quickly improve the daily experience of commuters. It is what commuters want, and we have assessed that it is worth the public investment. Both the $1.1 billion over the next 10 years for bus capacity, and the $60 billion that we are putting into the rail system, are worthwhile public investments.
Despite this Government package and independent of this Government package, regular and incremental fare increases will continue to be necessary, as wages and operating costs rise, so that the bus industry can stay financially viable. The Government will also continue to make sure that needy commuters get adequate assistance for their transport expenses.
The MOT will elaborate further on all these issues during their COS.