Singapore Budget 2012 – $1.1 Billion on Bus Service Enhancement Fund

This post is taken from :

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1186296/1/.html

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.

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