Singapore’s Case of Institutional Arrangements for Fare Affordability

In public transport, achieving quality service and affordable fares with financial viability require concerted government intervention. Direct government intervention can jump-start the industry’s development but the case for intervening in the affairs of commercial companies is more debatable. Government has to decide on the roles of public agency that can act as the final arbiter between the interests of the commuters and the commercial operators. A useful framework to understand and debate where government intervention sits or should sit, is to map it against the triangular relationships of fare (or price), service standards (or quality) and viability (or cost). The price-cap model of fare regulation is feasible for public transport. For better public acceptance, a mechanism can be devised to allow for exceptional intervention by the fare regulation authority, to address any concerns regarding excessive profitability of commercial operators. Pegging the fare cap formula to macro-economic factors and sharing of productivity gains protect commuters, incentivise cost-efficiency and encourage non-farebox revenue maximisation. Periodic re-calibration of formula ensures currency and certainty. In a commercially driven industry structure and if market contestability is lacking, the regulatory agency needs a second policy lever to check on service quality and universal service obligations of commercial operators. Ticketing technology is a key enabler for any fare structure reform. Provision of ticket payment services should be open to multi-commercial card managers but the regulatory agency should retain the right to data use. A distance-based through-fare structure will eliminate the transfer penalty and support the hub-and-spoke model of public transport system. Fare structure reform can be done together with annual fare adjustments, but supporting infrastructure for integrated information services should be in place. A key challenge for the regulatory agency is to develop a revenue apportionment model that caters to both commercial and commuters’ interests. Fare affordability can be tracked using an indicator based on a characteristic household that is representative of the public transport users. Community-led financial help to the lowest quintile group is more targeted and it builds direct constituency relationships. Social fare introduction should be preceded by clear social objectives and such fares should be linked to the standard fare structure. This paper discusses how Singapore attempts to develop and effect a fare review mechanism, carry out fare structure reform and track fare affordability, from a practitioner’s perspective. The aim is to achieve quality service and affordable fares with financial viability.Institute of Transport and Logistics Studies. Faculty of Economics and Business. The University of Sydne