Wednesday, July 13, 2011

SBS and SMRT should stop "passing the buck" to commuters

Public transport operators SBS Transit and SMRT appear to have short social and institutional memories, judging by their applications to the Public Transport Council (PTC) to seek an adjustment in bus and train fares.

Wasn’t it just two months ago that we saw a beleaguered Prime Minister Lee Hsien Loong address a lunch time rally at Raffles Place apologizing for the failings of the PAP-led government and the subsequent post-election ‘retirement’ of three ministers, including the then transport minister Raymond Lim.

Wasn’t it not too long ago in 2008 that the transport ministry stated that “public transport operators are not allowed to pass on to customers their direct costs, such as fuel and wage costs, or to base their fares on these costs”. Yet, this appears to be exactly what the two operators are doing going by statements articulated by both operators.

Based on reports in the mainstream media, SMRT claimed that its application for the maximum fare adjustment of 2.8 per cent was driven by rising energy and manpower costs while SBS Transit had indicated that it was facing cost pressures for fuel and energy on top of investments in its fleet renewal. Both operators also claimed that these cost pressures persist despite their efforts to lower costs and increase productivity.

No matter how much their try to dress up their applications and wrap it with the annual fare adjustment formula, their own words are a clear indictment of their willful attempt to undermine the position of the transport ministry on direct costs, and make the PTC complicit in this act of undermining the transport ministry by approving the fare increase.

To be clear, the annual public transport fare adjustment formula is pegged to changes in the Consumer Price Index (CPI) and the Wage Index (WI), which measures national average monthly earnings. What this means is that affordability of fares to the consumer should prevail over the need of the operators to manage their costs in order to improve their profit margin from operating a public service.

Given the continuing concern with cost of living issues among many Singaporeans, I am not surprised that many have reacted with disdain to the prospect of a further hike in public transport cost (in cost of living terms), even though the last adjustment to bus and train fares was implemented in 2008.

Back then in 2008, the fare increase of 1.7 per cent had been received with a sense of resignation but it would be a mistake for the transport operators, the PTC and the government to assume that the public would be so accepting of an increase in bus and train fares now. The transport ministry, now helmed by Lui Tuck Yew, would do well to remind the PTC of the ministry’s 2008 position.

Furthermore, economists have also forecasted a slowdown in Singapore's economic growth, which hopefully will be in the deliberations of the PTC chaired by Gerard Ee.

This new attitude of critical circumspection is also fueled by the general experience of commuters who have not seen much of an improvement in public transport services despite the previous fare increases. Ask anyone to think about public transportation and the images that come to mind are long queues, packed bus interchanges and MRT stations, crowded buses and trains.
The SMRT had also attempted to dress up its rising costs with the opening up of Phase One and Two of the Circle Line, but isn’t that to tantamount to passing the buck (the direct cost of operating the Circle Line) to the consumer? Wouldn’t opening the Circle Line lead to a new ridership base and a new revenue stream that over time would pay for the investment in the MRT network?

Such a fallacious argument is also inherent in SBS Transit’s linking of its cost pressures to its $268 million investment in 600 new buses to renew its fleet. Again, the purchase of the new buses is a direct cost to ensuring the continued ability of SBS Transit to deliver its services. Why should commuters have to bear the cost of the fleet renewal when it is the bus company’s responsibility to ensure that commuters are provided with safe and functional transportation?

Also, given the fact that both transport operators continue to report operating profits – SMRT made a profit of $161 million for the year ending 31 March while SBS recorded a profit of $54 million last year – no one can blame the average Joe for thinking that the applications to the PTC are but an attempt to line pockets of the shareholders of both operators instead of truly providing a world-class public transport experience to commuters.

This perception is borne out of the fact that both public transport operators are privatized entities instead of state-run corporations. Not surprisingly, many believe that both SBS Transit and SMRT would have no qualms about passing on the cost to commuters in their quest to boost their profit margin.

The irony of the situation is that both companies are actually operating a public service and as such, should be operating on the basis of sustainability first instead of how much profit, which translates into dividends, they can deliver to their shareholders.

Instead of exploiting their duo-poly, as most commuters have no choice but to use the services of both companies, SBS Transit and SMRT should demonstrate how they are helping Singaporeans get from place to place efficiently and comfortably without adding to their daily cost of living expenses.

And only when they can deliver the quality of service that makes public transportation a truly pleasant experience will Singaporeans be more amenable to accepting increases in their bus and train fares.
As commuters, all of us are ultimately customers of these companies and I believe that it would be fair to say the following is a fair depiction of how we feel: “Show me and let me experience it, and if I appreciate and like it, I would probably be willing to pay more for it. Don’t tell me you are going to do it and ask me to pay more for it, only to disappoint me with less than what I had been promised.”

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