Fare Regulation Framework

In regulating bus and rail fares, PTC is guided by both the fare review mechanism as well as its statutory mandate. PTC aims to safeguard the public interest by keeping fares affordable, while ensuring that the public transport system stays financially viable in the long run.

In 2013, PTC adopted a fare review framework recommended by the Fare Review Mechanism Committee (FRMC). Under this framework, the allowable fare adjustment is based on a formula that is pegged to macro-economic factors. Within the formula, there is a ‘productivity extraction component’, which enables the public transport operators to share their productivity gains with commuters. Commuters in turn will benefit in the form of lower fare adjustments.

The formula, which is valid from 2013 to 2017 is as follows: 

Fare Adjustment Formula = 0.4cCPI + 0.4WI + 0.2EI - PE
Core Consumer Price Index (cCPI) Change in core Consumer Price Index over preceding year
Wage Index (WI) Change in Average Monthly Earnings (Annual National Average) over the preceding year, adjusted to account for any change in the employer’s CPF contribution rate
Energy Index (EI) Change in Energy Index over the preceding year. The Energy Index is a composite index of price changes in electricity and diesel.
PE Productivity extraction component of 0.5%, based on half of operators’ productivity gains.

This formula determines how much fares can be adjusted, also referred to as “allowable fare adjustment quantum”. However, PTC may vary the quantum to be granted at each fare review exercise, or defer an adjustment to the next exercise.

Please refer to the FRMC Report below for more details. 

Download 2013 FRMC Report (PDF, 3 MB)

Fare Affordability

To ensure that fares stay affordable, PTC tracks how much households spend on public transport in proportion to the household income. Two groups of households are tracked :

a) Households in the second quintile : This group refers to households that earn more than the bottom 20 per cent but less than the top 60 per cent and represent the profile of the average public transport commuter 

b) Households in the second decile : These households earn more than the bottom 10 per cent but less than the top 80 per cent and represents the lower-income households.

This study found that fares have remained affordable compared to the annual wage increases. Over the last ten years, both groups of households have been spending a smaller portion of their income on public transport fares. This means that public transport has become more affordable for the average household over the years.

regulation graph

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