Hornbill Unleashed

August 30, 2016

Stop micromanaging bus operators

Filed under: Politics — Hornbill Unleashed @ 9:01 PM

Under the Urban Public Transport National Key Result Area (UPT NKRA), the Interim Stage Bus Support Fund (ISBSF) was set up in January 2012 with an allocation of RM400 million to help stage bus operators run non-profitable routes for the benefit of the rakyat.

Funding will continue in 2016 but bus companies have only received payment for January as low oil prices have greatly impacted Petronas’ profits, which is the single largest source of Malaysian government revenue.

Last year, Petronas recorded after-tax profit of RM21 billion, 56 percent lower than in 2014, and dropped further to 60 percent for the first quarter of this year.

In January, the Government revised the 2016 Budget by cutting down RM4 billion in operating expenditure and RM5 billion in development expenditure.

In August, the Land Public Transport Commission (SPAD) disclosed that total budget allocation for the ISBSF is RM661.7 million to date. Should this subsidy be continued?

The answer is yes, as it would cost the government more to run bus companies. For example, Rapid Bus incurs RM200 million losses annually.

However, the ISBSF was meant as an interim measure until it is substituted by the Stage Bus Services Transformation (SBST) programme, also known as MyBas.

Under the SBST programme, the Government is expected to spend about RM500mil in 2016 and rising to RM800mil, RM1.3bil and RM1.9bil from 2017 to 2019. From 2020 onwards, it will spend about RM2.7bil annually. These forecasts were made before oil prices nosedived.

Clearly, initial targets set for ISBSF and SBST are no longer tenable under the regime of low oil prices affecting government revenue. Ironically, well-run bus companies do not need ISBSF subsidy or participate in SBST.

Since SPAD became operational in January 2011, it had announced fare hikes only for taxis and express buses in 2015. Budget taxi fares were increased from 87 sen per km to RM1.25 per km, and RM17.14 per hour to RM25 per hour, a jump of 44% and 46% respectively.

Express bus fares were raised from 9.3 sen per km to 11.4 sen per km, while stage buses remained at 94 sen for the first 2 km and 9.4 sen for subsequent km.

As such, the maximum fares stage bus operators can charge are RM3.70, RM4.50 and RM5.45 for 32 kms, 40 kms and 50 kms respectively, based on 2009 rates.

Fares for travelling within the four zones in Kuala Lumpur are RM1, RM1.90, RM2.50 and RM3.10 respectively.

Before the Bus Network Revamp (BNR) was introduced by SPAD in December 2015, there were too many bus companies competing in the same routes, resulting in others underserved. Operators competed by lowering fares.

For example, a bus company charged only RM2 instead of RM3.70 for 32 kms to Rawang from Kuala Lumpur. After the implementation of BNR, the operator wanted to raise fare to RM3.10 by applying the maximum allowed within Kuala Lumpur, although Rawang is well inside Selangor.

Although the operator is legally allowed to raise fares within limit, doing so will incur the wrath of government officials tasked to achieve Key Performance Indicators (KPIs) under the NKRA.

Instead of getting the blessing to charge either RM3.70 or RM3.10, the company was asked to introduce monthly passes and give away 30% discount off the RM2 fare.

At RM1.40 for 32 kms, it works out to 4.4 sen per km. At this rate, the fares collected from 28 passengers combined are less than a budget taxi rate of RM1.25 per km. Arm-twisting bus operators to charge unreasonably low fares would lead to their demise.

What is the point of giving life-support to operators in the form of ISBSF but bleed them to death by coercing them to charge RM1.40 when RM3.70 was allowed since 2009?

Bus operators suffer untold miseries as subsidy was reduced with the introduction of BNR and payments for February onwards have yet to be released.

Introducing monthly passes incur administrative costs to issue and monitor. Such an exercise should be undertaken by the government, allowing for seamless payment for all public transport.

Government officials should not micromanage the bus industry and flawed fundamentals should not be glossed over with impressive KPIs.


Y S Chan


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