2018 Fare Formula Review and Enhanced Transfer Rules to Adapt to Changing Public Transport Landscape

Date: 22 March 2018

Enhanced Transfer Rules Infographic v2

The Public Transport Council (PTC), an independent body that regulates public transport fares, is making enhancements to transfer rules to provide more flexibility to commuters. In addition, PTC is revising the fare formula to ensure that fares keep pace with changes in the public transport industry’s cost structure. This formula forms the basis for the PTC’s deliberation at each year’s fare review exercise, where the PTC grants fare adjustments.  The fare formula review is typically done once every five years, and the 2017/2018 review was completed after a year-long consultation with commuters, operators and industry experts.

Ensuring our Transfer Rules and Fare Formula Remain Relevant

Over the past few years, the public transport landscape has evolved significantly to bring greater convenience to commuters.

First, public transport capacity has increased by around 25% from 2012 to 2017. In particular, more than 1,000 new buses have been introduced through the Bus Service Enhancement Programme and Bus Contracting Model since 2012. Over the same period, around 200 new trains were injected into the network to augment the capacity of existing rail lines.

Second, our public transport network has become denser with the addition of new lines and extensions, which have led to an increase in the length of our rail network by 74km. A denser network provides more network resilience and opens up more travel connections and routes for commuters. For example, some commuters now have the option of walking between stations to get onto another nearby rail line.

These capacity upgrades and network expansions are necessary and have been welcomed by commuters. However, they come at a cost. To keep pace with these changes, PTC has reviewed the transfer rules and fare formula to ensure they remain relevant for our public transport system and commuters.

More Flexible Transfer Rules

With more rail lines opening in the coming years, there will be more instances where commuters may save time by using a combination of rail rides to reach their destination. These could include making a walking transfer between nearby stations and continuing their journey with another rail ride on a different rail line.

Under the current transfer rules, commuters making such transfers will incur additional boarding charges. To facilitate more efficient and seamless public transport journeys, the PTC has decided to remove the additional boarding charges for commuters who make rail transfers between any two different MRT/LRT stations within 15 minutes.[1] All other existing transfer rules will remain.[2]

With these changes, at least 6,000 daily journeys can have shorter travel times and lower fares[3]. We expect even more commuters to benefit eventually as they adjust their current travel routes to take advantage of the new transfer rules. The new transfer rules will take effect together with the fare adjustments for the 2018 Fare Review Exercise at the end of this year.

A More Responsive Fare Formula

To guide PTC’s annual fare review exercises, the fare formula needs to be nimble and responsive to industry cost changes as our public transport landscape undergoes transformation. It is in this spirit thatPTC will introduce a Network Capacity Factor (NCF) into the fare formula, to better reflect the cost movements due to changes in public transport network capacity (e.g. running more buses and trains over longer distances) and commuter usage (e.g. more passengers taking more trips on buses or trains). PTC will also update the weights for the price indices and the Productivity Extraction Factor (PEF) in the existing formula to reflect the latest industry cost structure.

The revised fare formula, to be applied from 2018 to 2022, is as follows:

Maximum Fare Adjustment[4] = 0.5 cCPI + 0.4 WI + 0.1 EI – 0.1% + NCF

Network Capacity Factor (NCF)

Between 2012 and 2016, annual operating costs increased by over $900 million. Annual fare revenue increased by around $230 million over the same period, mostly due to ridership growth. However, this only covered about 25% of the increase in annual operating costs. In fact, fares were reduced for the past three consecutive years, mainly due to subdued energy prices. To cover the operating expenditure shortfall, the Government has stepped in to provide substantial subsidies. However, a widening gap between cost and fares is not sustainable for any public transport network. To address this issue, PTC will therefore introduce a NCF[5] in the fare formula to better reflect cost movements due to public transport capacity changes and commuter usage.

Fare Review Exercise 2018

The revised fare formula will apply from the 2018 Fare Review Exercise onwards. As with past years, the 2018 fare adjustment quantum will be finalised and announced at the third quarter of this year.

PTC Chairman, Richard Magnus, said, “Our public transport landscape is evolving at a tremendous pace to improve commuter service standards. To remain relevant, our fares, including the transfer rules, have to be adjusted to the market dynamics as well as commuter needs. This is critical in ensuring the long term financial sustainability, ease and seamlessness of our public transport network.”

Annex A: Comparison of 2013 and 2018 Fare Formula and Calculation of the Network Capacity Factor (NCF)
Annex B: Revised Cost Structure
Annex C: Examples of Fare-Charging under Enhanced Transfer Rules
Annex D: Distance Fares Transfer Rules


 

[1] For an example of how fares are charged for rail transfers under the new transfer rules, refer to Annex C.
[2] Refer to Annex D for the transfer rules.
[3] Exact travel time and fare would vary depending on travel patterns. For examples of how commuters may save time and/or fares under the new transfer rules, refer to Annex E.
[4] Details on the various components of the formula are as follows:
cCPI = Year-on-year change in core Consumer Price Index;
WI = Year-on-year change in Wage Index measured by the Average Monthly Earnings (National Average), adjusted for any change in the employer’s CPF contribution rate;
EI = Year-on-year change in Energy Index which is a composite index derived from diesel price and electricity tariff; and
NCF = Year-on-year change in Network Capacity Factor which measures capacity provision relative to passenger demand for the entire public transport system;
0.1% =  Productivity Extraction Factor component that is based on half of the productivity gain achieved by the PTOs.
[5] For more details on how the NCF is calculated, refer to Annex A.

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