- Joined
- Jul 24, 2008
- Messages
- 33,627
- Points
- 0
[h=2]$1.1B BSEP will end up as dividends to shareholders & bonuses
for management[/h]
May 27th, 2013 |
Author: Contributions
With respect to many other countries which includes London, Germany and etc
in the Europe, Australia, and also China, these are some point of considerations
for Singapore’s public transport system:
1) Governmental Subsidy
Unlike these countries where the government provide subsidies for the public
transport system through tax payer’s money because social cost from (a) the
benefits of public transport provision and (b) the impact of congestion due to
inadequate public transport system exceeds the monetary cost in terms of
congestion,
Singapore’s government washes their hands of subsidizing for a public goods
though privatizing our public transport operations to SBSTransit and SMRT. Also,
as listed companies, SBSTransit and SMRT’s KPI hinges on their profit and thus
KPI of public transport systems, which includes Affordability, Level of Service,
Reliability and etc takes a back seat in comparison with revenue and profit.
2) Financial Framework
In many other cities, private transport companies operates public transport
system. However, their financial framework encourages operators to provide high
level of services:
(2a) Sydney’s public transport system, operators are reimbursed based on the
number of trips they operate, which is the key determinant of Level of Service,
Comfort and capacity.
(2b) Similarly, in the UK, and in many other European countries, public
transport operators provides service based on a contract, whereby the number of
trip that they operates have already been well defined, and they will be paid an
amount agreed upon by both parties as stated in the contract, that takes into
account the operating cost.
Under both (2a) and (2b), the revenue from public
transport operations goes to the government or regulator, which will pay PTO a
greater sum of money based on the number of trips they operate, or as agreed in
contract.
(2c) In contrast, under Singapore’s fare-box revenue system, public transport
operators keeps all revenues from operation. This sum of money is expected to
cover all operating cost, which also includes the payroll for all drivers and
management. Besides that, as public listed companies, dividends to shareholders,
auditing cost and etc are also expected to come from the fare-box.
This means that for every sum of money that the PTO fork out, they expect to
reap a greater sum of return of investment. Thus, operators do not have
incentives to offer good level of services, through increasing capacity.
Instead, their KPI hinges on (2c1) ferrying the maximum number of passengers per
trip; or (2c2) channeling commuters from basic services to Express or premium
services.
PTO’s profit maximization strategy is evident in the deployment of buses from
the basic fleet for fast-forward services, particularly buses for 151e from 151
during the hours where 151 are the most severely crowded.
Let us not forget that for these services, despite concession pass holder
have already paid a certain sum for transport, they will be charged a fresh 1.5
times basic fare or the whole premium fare if they uses these services.
Conclusion
Thus, under these arrangements, other than meeting the minimum requirement
defined by the authorities, PTO have no incentives to offer a good level of
service.
Moreover, the PTC is well known for endorsing that the level of service is
good despite certain buses such as 8, 15, 23, 145, 139, 151 and etc,being worse
than overcrowded trains in India, during certain hours.
While the government may offer funding to PTO through the Bus Service
Enhancement Programme (BSEP) program, due to the reasons as discussed, these sum
of funding will only offer temporal improvement due to the change in schedule
imposed with the BSEP.
In the long run, the BSEP is unlikely to improve level of service. Instead,
it is likely to inflate the PTO’s KPI through lowering the fixed cost of
operation through waiving the cost of new buses, and these cost savings are most
likely to end up as dividends to shareholders, or company’s performance related
bonuses for the management team.
.
Daniel Tan
for management[/h]
With respect to many other countries which includes London, Germany and etc
in the Europe, Australia, and also China, these are some point of considerations
for Singapore’s public transport system:
1) Governmental Subsidy
Unlike these countries where the government provide subsidies for the public
transport system through tax payer’s money because social cost from (a) the
benefits of public transport provision and (b) the impact of congestion due to
inadequate public transport system exceeds the monetary cost in terms of
congestion,
Singapore’s government washes their hands of subsidizing for a public goods
though privatizing our public transport operations to SBSTransit and SMRT. Also,
as listed companies, SBSTransit and SMRT’s KPI hinges on their profit and thus
KPI of public transport systems, which includes Affordability, Level of Service,
Reliability and etc takes a back seat in comparison with revenue and profit.
2) Financial Framework
In many other cities, private transport companies operates public transport
system. However, their financial framework encourages operators to provide high
level of services:
(2a) Sydney’s public transport system, operators are reimbursed based on the
number of trips they operate, which is the key determinant of Level of Service,
Comfort and capacity.
(2b) Similarly, in the UK, and in many other European countries, public
transport operators provides service based on a contract, whereby the number of
trip that they operates have already been well defined, and they will be paid an
amount agreed upon by both parties as stated in the contract, that takes into
account the operating cost.
Under both (2a) and (2b), the revenue from public
transport operations goes to the government or regulator, which will pay PTO a
greater sum of money based on the number of trips they operate, or as agreed in
contract.
(2c) In contrast, under Singapore’s fare-box revenue system, public transport
operators keeps all revenues from operation. This sum of money is expected to
cover all operating cost, which also includes the payroll for all drivers and
management. Besides that, as public listed companies, dividends to shareholders,
auditing cost and etc are also expected to come from the fare-box.
This means that for every sum of money that the PTO fork out, they expect to
reap a greater sum of return of investment. Thus, operators do not have
incentives to offer good level of services, through increasing capacity.
Instead, their KPI hinges on (2c1) ferrying the maximum number of passengers per
trip; or (2c2) channeling commuters from basic services to Express or premium
services.
PTO’s profit maximization strategy is evident in the deployment of buses from
the basic fleet for fast-forward services, particularly buses for 151e from 151
during the hours where 151 are the most severely crowded.
Let us not forget that for these services, despite concession pass holder
have already paid a certain sum for transport, they will be charged a fresh 1.5
times basic fare or the whole premium fare if they uses these services.
Conclusion
Thus, under these arrangements, other than meeting the minimum requirement
defined by the authorities, PTO have no incentives to offer a good level of
service.
Moreover, the PTC is well known for endorsing that the level of service is
good despite certain buses such as 8, 15, 23, 145, 139, 151 and etc,being worse
than overcrowded trains in India, during certain hours.
While the government may offer funding to PTO through the Bus Service
Enhancement Programme (BSEP) program, due to the reasons as discussed, these sum
of funding will only offer temporal improvement due to the change in schedule
imposed with the BSEP.
In the long run, the BSEP is unlikely to improve level of service. Instead,
it is likely to inflate the PTO’s KPI through lowering the fixed cost of
operation through waiving the cost of new buses, and these cost savings are most
likely to end up as dividends to shareholders, or company’s performance related
bonuses for the management team.
.
Daniel Tan
