Home News LTA posts deficit of S$1 billion in bus contracts for 2018-2019

LTA posts deficit of S$1 billion in bus contracts for 2018-2019

This is due to “losses” incurred by public bus operations because of fares falling below what government contracts awarded to companies like SMRT and SBS Transit actually cost

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Singapore—The Land Transport Authority (LTA) posted in its latest annual reports a deficit of S$1.013 billion for the 2018-2019 financial year. This is due to “losses” incurred by public bus operations because of fares falling below what government contracts awarded to companies like SMRT and SBS Transit have actually cost.

The LTA reported S$912 million in operating income collected from the time period, with S$834 million from revenues from bus fares and $78 million from other incomes.

However, the expenditures for buses amounted to S$1.925 billion, which meant a shortfall of over S$1 billion. Compared to five years ago, this shortfall is fifty percent higher.

This is how the bus contracting model works in Singapore: all operating assets are the property of the Government, which also collects revenue from the fares. Transport companies, in turn, place bids to run routes for a fixed amount of money for a specific period of time.

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This contract system has been beneficial to operators, the Straits Times (ST) reports. For example, SBS Transit, which is the nation’s largest bus company, saw a record S$80.1 million net profit as of the end of 2018, a 70 percent rise.

However, these companies have faces higher standards of service as well, being required to operate at six to eight-minute intervals during two-hour peak periods.

The Ministry of Transport told ST that in a comparative study done by the Nanyang Technological University last year, Singapore ranked second lowest in terms of cost, in spite of the deficit. The cost of buses in Singapore, which is four cents per place-km, is lower than in many cities in the west.

Nominated MP Walter Theseira, a transport economist from the Singapore University of Social Sciences (SUSS), explained it this way: “Bus contracting was not about saving costs. It was about operating the level and frequency of services that the Government believed the public wanted.

Now, the real question is whether the price LTA is paying for bus services today is the lowest it can go, for the level of service quality desired.”

Mr Theseira said that the bus contracting model should be reviewed.”I would also favour some type of external or independent review so that the nature of the contracts could be benchmarked.”

ST also quotes Park Byung Joon, an urban transport expert from SUSS, who said,”It is LTA who set the service standards… Then, it is PTC (Public Transport Council) who decides how to raise money, through fares. To me… the two decisions should be made by one body.”

At the same time, the rail sector has also seen considerable subsidies over the years. Last year, as of March 31, 2018, the total amount of S$2.5 billion was injected into the Rail Sinking Fund, wherein S$1.3 million went to upgrades.

This year, it was announced that the Government expects to spend S$4.5 billion through 2024 on renewing ail operating assets. Since 2017, the LTA has only collected around S$1.9 million from rail licensing fees from the operators, in a large part due to the fact that the largest operator, SMRT, has reported losses./ TISG

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