Reply from a MP and just bus-spotting

1 Mar

Some days ago, I wrote a letter asking the esteemed members of the parliamentary committee for transport regarding the govt’s decision to subsidise public bus operators to the song of $1.1bil. My main concern was the so-called privatised, listed, dividend paying model of Singapore’s public transport operators (PTO). If the govt is going to subsidise PTOs, then should service standards be set? Should PTOs return the subsidies to state coffers? Should they continue to pay high dividends?

In any case, I was really pleased that at least one of the MPs replied. Really. Check this out.

Ok back to bus-spotting.

Public transport operators are profitable even though their bus operations might not be so. SBS incurred losses of about $6mil last year although it made a profit of $14.9mil on bus operations in 2010. SMRT’s bus business has perennially been in the red. However, I believe, there was precisely the reason why PTOs were privatised and listed together with rail assets. Their profits from rail operations should subsidise their bus operations. This was also precisely why there were granted both rail and bus licenses was that they can synergise and make both operations more efficient. 

So why is everybody harping on the fact that bus operations are not making profits for the PTOs and hence they deserve public sympathy and state assistance??

Another point. Granted, it is not uncommon in other countries where government subsidises private companies running public bus services,  but it is also uniquely Singapore that PTOs pay out one of the highest dividends on a listed stock exchange. Capitalism never stink that bad ever. 

As it is, public buses do not pay COE, Additional Registration Fee (ARF), main vehicle tax, duty on diesel and they are allowed to run for 20 years instead of the usual 10 years. They pay a nominal rent for interchanges while building and maintenance of bus stops and interchanges are paid by taxpayers. And after numerous rounds of fare hikes, PTOs are still making losses while paying our bus drivers a salary that many in Singapore would deem unattractive.

Despite not paying for duty on diesel, soaring oil prices have been a large component of costs for PTOs. SMRT’s bus operations incurred an operating loss of $7.9mil for the first 9 months of FY2012.  In 2011, SBS paid $4.5 mil in ERP fees and $5.5mil in road taxes. If the aim of ERP is to discourage use of private cars and steer people into using public transport, then I don’t see why it public buses should not be excused from this regime. Road tax should also be waived waived (if someone can think of a good argument).

Besides waiving public buses from taxes, govt and PTOs should make a conscious effort to reduce the energy bill of public buses through development of hybrid or CNG technologies for buses.  More route planning and reform is also needed from the LTA to better utilise buses on the roads.

ComfortDelGro, the parent of SBS, has been actively expanding its operations overseas over the years. Interestingly, its bus operations in Australia makes profit margins of around 18.7% – operators are paid on a per-mile-operated-basis and the amount is adjusted for increases in operating costs such as staff and fuel costs. Perhaps we should commence study on these countries to see how operators can stay afloat and yet keep fares reasonnable for commuters.

Fundamentally, the questions are: Are bus companies ran efficiently? Are routes, now centrally planned by LTA, efficient? Are certain trunk services only crowded on certain portions? Are the fares too low for any profits to be made? Are the costs too high even though the companies are efficiently ran? Are the PTOs inefficiently managed so much so that govt is actually subsidising a failing company? 

With a PAP majority govt, it seems like Budget2012 would inevitably be passed. If government is going to subsidise bus operators then we need more strict oversight to make sure consumers get better service instead of boosting dividends and stock prices. Govt should set KPIs for certain bus routes identified to be in dire need of improvement and monitor the operations of these services. If PTOs fail, subsidies should be removed or they be ordered to pay back the amount. Part of the $1.1bil should be channelled to improve the salary of bus drivers; SMRT bus drivers earn a basic monthly salary of $1200 while it is SBS pays a higher $1375 making it hard for them to attract locals.

Update on 2 Mar: DPM Tharman updated that $280mil of the $1.1bil i budgeted for purchase of 550 buses while the remaining $820mil is to cover the net operating costs of these buses for the next 10 years. These 550 additional buses to be funded by govt is projected to be a loss-making operation and govt will scrutinise the operators’ accounts. Should they make a profit or lower their losses, the govt funding will be reduced correspondingly or govt would reap the profits, if any. If so, I urge govt to make these estimates public so PTOs can be held accountable when the time comes. The PTOs will also have to improve service levels as a condition for govt’s investment. If so, make these levels public too. I believe the public and taxpayers should know these matters. 

DPM also argued that that the $1.1bil bus package is a subsidy for commuters and not operators. This is rather creative use of the English language. At the end of the day, the PTOs turned in healthy profits for years upon years from their rail operations and paid out generous dividends to shareholders – some of these should have been funding the renewal of bus operations. At the end of the day, the govt when executing their plan to increase our population to 6mil did not factor in the need to grow our public transport system. Commuters should remember this even as we take into account govt’s attempt to rectify the transport woes.

And if you follow DPM’s argument, he is essentially arguing that these are well-ran companies that would have turned in a decent profits if they were allowed to raise their fares. If you are the only water supplier in a desert town, can one refuse to drink from you?

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