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The Government today (November 17) announced the proposed measures to improve the basis for considering bus fare adjustment.
The main objectives of the proposed measures are to facilitate bus fares to go upward and downward to provide greater responsiveness to the prevailing economic conditions, and to improve objectivity of fare adjustment process while maintaining the flexibility to consider the factors embodied in the existing Modified Basket of Factors ("MBOF") approach.
To achieve the above goals, the Government proposed to build on the MBOF approach by retaining all existing factors and introduce a new fare adjustment formula and several new objective benchmarks for fare adjustment assessment.
"The inclusion of the formula will provide a more objective and responsive starting point for considering bus fare adjustment. We will use the outcome of the formula as the reference indicator in considering whether fare adjustment rate is supportable and justifiable at a given juncture," a spokesman of the Environment, Transport and Works Bureau explained.
"The formula should not operate as an automatic determinant of fare adjustment outcome. The CE-in-Council should continue to retain the ultimate control in determining bus fares to consider and balance all relevant factors including public affordability and the bus operators' financial viability," he added.
The Government today introduced to the Legislative Council Panel on Transport the proposed improvement measures to be made to MBOF approach, together with the application for new franchises by Citybus (Franchise 1), New Lantao Bus and Kowloon Motor Bus. The Administration's intention is to seek CE-in-Council's approval for the new arrangement on fare adjustment to take effect in January 2006.
Under the proposal, a new fare adjustment formula comprising objective elements of composite consumer price index, wage index and productivity gain element will be introduced. The Government will also make reference to the median household income and the weighted average cost of capital ("WACC") for the bus industry in gauging public affordability and financial viability of bus operators for making recommendation on the rate of fare adjustment to the CE-in-Council. The triggering point for activating the passenger reward arrangement will be lowered from the present 13% return on average net fixed asset to 9.7%.
Details of the proposals are set out in the paper issued to the Legislative Council Panel on Transport, which has been uploaded to the website of the Environment, Transport and Works Bureau (www.etwb.gov.hk).
The proposed improvements will bring benefits to the travelling public as fare levels would be able to fall or rise in future to better reflect changes in economic circumstances and the Government can initiate fare reduction having regard to the prevailing economic conditions. Moreover, the introduction of productivity gain element in the fare adjustment formula will increase the magnitude of fare reduction or moderate fare increase when one is required. Since the formula does not include fluctuating and volatile cost elements, it can avoid as far as practicable passengers having to bear directly the impact of any drastic changes in operating costs. The modified approach embodies objective indicators, including median household income and the WACC, and can thus enhance the objectivity of the basis for initiating the fare adjustment process as well as strike a balance between public affordability and bus operation.
The spokesman said that the Administration would continue the existing practice of consulting the Transport Advisory Committee and the Legislative Council Panel on Transport before submitting its recommendation on the rate of adjustment to the CE-in-Council.
"We'll also explain to the public and Legislative Council members how the approved rate of bus fare adjustment is arrived at by comparing the set of objective indicators during the process, and how the approved rate of fare adjustment will affect the financial performance of the bus operators concerned," he said.
The spokesman said that upon approval from the CE-in-Council, the proposed improvements to the bus fare adjustment arrangement would be implemented in early 2006. The new arrangement would be applied to all six bus franchisees on the same date.
Upon the implementation of the proposed changes to the MBOF approach, the bus operators will implement fare reduction initiatives as agreed in the context of franchise negotiation. These include 15% and 5% reduction respectively on routes where the single fare is $15 or above and between $10 and $14.9 on an advance paid day return basis, special elderly concession at $2 flat fare or half fare on Sunday and public holiday and the introduction of an addition of 47 bus-bus interchange schemes.
The new fare adjustment arrangement, together with the fare reduction initiatives, would be reviewed in three years' time so as to monitor the effectiveness of the new approach, the spokesman added.
The Government has also proposed recommending the granting of new franchises to Citybus (Franchise 1), New Lantao Bus and Kowloon Motor Bus upon the expiry of their existing franchises in 2006 and 2007. After consulting the Legislative Council Panel on Transport and the Transport Advisory Committee, the Administration will seek CE-in-Council¡¦s endorsement on the granting of new franchises in January 2006.
Ends/Thursday, November 17, 2005
Issued at HKT 19:29
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