http://www.asiaone.com/Motoring/News/Story/A1Story20090326-131263.html
Thu, Mar 26, 2009
The Straits Times
No direct link between fares and oil prices
TRANSPORT Minister Raymond Lim explained on Monday why public transport fares do not rise and fall as much as the price of oil.
This is because the changes in fares are based on a formula that is pegged to the Consumer Price Index (CPI) and the Wage Index of the year before.
And the impact of oil prices on fares is only through the CPI component. As the link is indirect, he said, 'fares will not drop as much when there is a dramatic drop in oil prices'.
'But equally, when oil prices shoot up, fares will also not shoot up as much either.'
Hence, when diesel prices shot up 40 per cent last year, it translated into an allowable fare increase of 3 per cent.
However, the Public Transport Council (PTC), the approving body for any change in public transport fares, made the operators bear more of the cost, resulting in fares going up by only 0.7 per cent last October, said Mr Lim.
He was replying to Madam Cynthia Phua (Aljunied GRC), who had asked why the fare revision was not in line with the drop in oil prices.
Mr Lim also said that the indirect link ultimately protects commuters. The PTC formula incentivises the operators to be efficient and moderates the effect of drastic changes in oil prices on fares, he said.
Madam Phua also asked whether the PTC would be more transparent in explaining its revisions.
Replying, Mr Lim said indicators such as the CPI and the Wage Index were in the public domain.
The recent decision by the transport operators to reduce fares and pass on their savings to commuters was outside the yearly fare review.
SBS Transit and SMRT decided on an overall 4.6 per cent fare cut despite the formula allowing a hike of up to 5 per cent, or six to seven cents, said Mr Lim.
From April 1, the overall reduction for each journey will range from two to 14 cents. For journeys involving more than one transfer, the reduction will be 26 or 38 cents.
Thu, Mar 26, 2009
The Straits Times
No direct link between fares and oil prices
TRANSPORT Minister Raymond Lim explained on Monday why public transport fares do not rise and fall as much as the price of oil.
This is because the changes in fares are based on a formula that is pegged to the Consumer Price Index (CPI) and the Wage Index of the year before.
And the impact of oil prices on fares is only through the CPI component. As the link is indirect, he said, 'fares will not drop as much when there is a dramatic drop in oil prices'.
'But equally, when oil prices shoot up, fares will also not shoot up as much either.'
Hence, when diesel prices shot up 40 per cent last year, it translated into an allowable fare increase of 3 per cent.
However, the Public Transport Council (PTC), the approving body for any change in public transport fares, made the operators bear more of the cost, resulting in fares going up by only 0.7 per cent last October, said Mr Lim.
He was replying to Madam Cynthia Phua (Aljunied GRC), who had asked why the fare revision was not in line with the drop in oil prices.
Mr Lim also said that the indirect link ultimately protects commuters. The PTC formula incentivises the operators to be efficient and moderates the effect of drastic changes in oil prices on fares, he said.
Madam Phua also asked whether the PTC would be more transparent in explaining its revisions.
Replying, Mr Lim said indicators such as the CPI and the Wage Index were in the public domain.
The recent decision by the transport operators to reduce fares and pass on their savings to commuters was outside the yearly fare review.
SBS Transit and SMRT decided on an overall 4.6 per cent fare cut despite the formula allowing a hike of up to 5 per cent, or six to seven cents, said Mr Lim.
From April 1, the overall reduction for each journey will range from two to 14 cents. For journeys involving more than one transfer, the reduction will be 26 or 38 cents.
