Expect higher MRT fares: Khaw Boon Wan
As costs of operating train system increase, fares are likely to go up, says Transport Minister
The recent improvement in rail reliability has come at "substantial expense" to the operators and the Government, Transport Minister Khaw Boon Wan told Parliament yesterday as he signalled that commuters will soon need to pay higher fares to foot the bill.
With the rail operators posting losses and the Government subsidising more than 30 per cent of public transport operations, Mr Khaw said that the next fare formula, due for a review in four years, needs to reflect the increased costs of operating the MRT system.
Mr Khaw said the Government will continue to operate under the Public Transport Council's (PTC's) current fare formula until the review in 2023, and he emphasised the need for future fare adjustments to be implemented in full, and in a disciplined manner.
Responding to Mr Sitoh Yih Pin (Potong Pasir) about an update on rail reliability, Mr Khaw said that in the 12 months ending this June, the MRT network clocked more than 950,000 mean kilometres between failure (MKBF, or the mean distance travelled before a train fault that lasts more than five minutes), putting it on par with other world-class systems like the Taipei Metro and Hong Kong's MTR.
But to support this level of reliability - a seven-fold improvement from 2015 - the rail operators had to ramp up operations and maintenance and are operating at a loss.
Mr Khaw said: "If we had strictly followed PTC's fare formula, the operators would have been better able to cover the costs of the intensified maintenance.
"As it is, the additional costs have been partly covered by increased Government subsidy and partly absorbed by the operators... This is certainly not sustainable."
Between 2016 and 2017, the total cost of running the rail network increased by around $270 million, and in the latest reported financial year, SMRT Trains incurred a loss of $86 million while SBS Transit's train division also posted losses in the tens of millions.
Mr Khaw said the original plan was for Government subsidies to fund only civil infrastructure, like the tracks, viaducts and underground tunnels, and the first set of rail operating assets, which cost $1.9 billion.
The subsequent operation and maintenance of rail assets was supposed to be fully paid for by the operators through the collection of fares and non-fare revenue, like advertising, while the depreciation cost was supposed to be largely recovered by the Government through licence charges. The Government expects to spend $4.5 billion on operating subsidies over the next five years, on top of the $25 billion it is spending on civil infrastructure, to build and equip new lines.
Responding to a query by Nominated MP Walter Theseira on how much the Government aims to reduce subsidies, Mr Khaw said: "Now, there is a substantial gap...Should we drive towards zero? We must never give up on this hope.
"But if it is not possible in the medium term, it doesn't matter. The key point is, we must not allow (the) operating subsidy percentage to continue to rise."
Commuters must also be prepared to pay higher fares for greater rail reliability as the incremental costs will be exponential, Mr Khaw said, when asked by Mr Sitoh if the Transport Ministry will strive to achieve a higher MKBF.
"If we can consistently maintain this one million (MKBF), I think that should be good enough. But if for various reasons, Singapore commuters are demanding an even higher level and are prepared to pay for that greater level of expense, then we leave that to the next Transport Minister."