The drop in energy prices seen in 2014 could translate to a reduction in public transport fares in the next fare review exercise at the end of the year.
Based on available data for 2014, the fare adjustment could be “in the region of negative one per cent”, said Transport Minister Lui Tuck Yew in Parliament on Monday (Jan 19), in response to a question on the fall in oil prices.
MP Gan Thiam Poh had asked, with regard to the ongoing 2014 fare review exercise, whether the Public Transport Council would consider a reduction of transport fares, as a result of the fall in oil prices since June 2014.
However, Mr Lui noted that the ongoing fare review exercise, which started in November 2014, looks at changes in indices for 2013.
“We will have to leave it to the Public Transport Council to assess the public transport operators’ applications for fare increase, the fare adjustment quantum as given by the formula and the affordability of public transport for Singaporeans, amongst other things, and decide on the fare adjustment,” the minister said.
The fare formula is pegged to changes in the core consumer price index, wage index and energy index over the preceding year. This reflects the operating cost structure of public transport operators, said Mr Lui.
The core consumer price index and wage index account for 40 per cent of the formula each. The energy index component, which accounts for energy and fuel costs, makes up 20 per cent.
In the ongoing 2014 exercise, the value of the energy index component was negative 12.6 per cent – due to lower energy prices in 2013 – but the core consumer price index went up by 1.7 per cent, while the wage index saw an increase of 4.3 per cent.
The fare adjustment quantum yielded by the formula would have been negative 0.6 per cent for the 2014 fare review exercise. However, the previous fare review exercise had announced a fare increase of 6.6 per cent in two steps.
A 3.2 per cent hike was introduced in April last year, with the 3.4 per cent increase to be carried over to the ongoing review. Mr Lui explained that is why there is a 2.8 per cent fare adjustment quantum for the ongoing fare review exercise.
The next fare review exercise is set to take place towards the end of 2015 and is based on data for the full year of 2014.