Any profit from $1.1b bus package will go back to government
SINGAPORE: Deputy Prime Minister and Finance
Minister Tharman Shanmugaratnam said that any profit made from the
$1.1 billion package for public transport operators (PTO) to grow
their bus fleet will go back to the government.
Mr Tharman said $280 million is budgeted for the purchase of 550
buses over the next five years, while the remaining $820 million is
to cover the net operating costs of the buses for 10 years.
He said the 550 additional buses is projected to be a loss-making
operation, and so the $1.1 billion package is expected to cover the
losses.
Mr Tharman said the government will scrutinise operators' accounts.
And should operators ever turn a profit or make lower losses, the
government funding will be reduced correspondingly.
A review will also be conducted in five years to check parameters
of the agreement.
Mr Tharman said: "The $1.1 billion package is expected to cover the
losses of the 550 buses, in other words, the additional costs, net
of revenue of the $1.1 billion package. $280 million is budgeted
for the purchase of the 550 buses over the next five years and $820
to cover the net operating costs for 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 the 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."
"We expect them to make losses based on their all existing
parameters. If we are lucky and somehow the system is
re-engineered, so that the losses are less than expected, or most
unlikely if they turn a profit, that will not come from the
government, the $1.1 billion will be reduced, as their losses are
reduced, and if they make a profit, it all comes back to us.
"So none of the $1.1 billion will go towards profits of the public
transport operators. It will be ring-fenced, their accounts will be
scrutinised, we will be paying according to what the costs actually
are. There is a review in five years to check the parameters of the
agreement."
Mr Tharman said the package is a subsidy for commuters and not a
subsidy for operators.
He said without the government stepping in to help boost bus
capacity, the significant service levels improvements would only be
achievable if fares are raised sharply.
He added that if operators had to do it on their own, their fare
revenues would have had to go up, by about 12 to 13 percent. And
this translates into an increase in passenger fares, of about 15
cents per journey.
Mr Tharman said: "How much is 12-13 percent? In the last five
years, since 2006, fares went by 0.3 percent, so 12-13 percent is
quite a significant leap compared to what we have seen in the last
five years. That would have been the only way for us to achieve the
service levels improvements if the government has not stepped
in.
He said the $1.1 billion government package, or $110 million each
year, is to step up bus service levels well beyond the current
service levels required of the operators.
He said it will increase bus capacity on existing heavily-utilised
routes, making them less crowded and giving commuters more pleasant
journey.
The number of new bus services will be added to improve
connectivity.
He said the PTOs will have to improve service levels as a condition
for the government's investment.
Mr Tharman said: "We cannot simply mandate the PTOs to add the 550
buses. First, because it goes significantly beyond the current
service levels of the current regulatory framework. Second, the
PTOs bus operations are already running operating losses and the
additional 550 buses in particular are projected to be a
loss-making operation.
He said despite the government package, and independent of the
government package, regular and incremental fare increases will
continue to be necessary as wages and operating costs rise.
He said this is so that bus industry can stay financially
viable.
Mr Tharman said the government will also continue to make sure that
needy commuters get adequate assistance for their transport
expenses.