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The Chief Executive in Council today (December 8) approved that the current Fare Adjustment Arrangement (FAA) for franchised buses, which includes a formula to assess the level of supportable fare adjustment, should continue to be adopted. While the components and their weightings in the formula will be maintained, the value of productivity gain in the formula will be set at zero until the next review in three years' time.
The current FAA was put in place in January 2006 with a view to enhancing the objectivity and transparency of the fare adjustment process and enabling upward and downward fare adjustments in accordance with economic conditions. In assessing franchised bus fare adjustment for the purpose of making recommendations to the Chief Executive in Council, the Government would take into account a basket of factors which include:
(i) changes in operating costs and revenue since the last fare adjustment;
(ii) forecasts of future costs, revenue and return;
(iii) the need to provide the operator with a reasonable rate of return;
(iv) public acceptability and affordability;
(v) quality and quantity of service provided; and
(vi) outcome of the fare adjustment formula (0.5 x Change in Wage Index + 0.5 x Change in Composite Consumer Price Index - 0.5 x Productivity Gain).
A spokesman for the Transport and Housing Bureau said the Government had completed a review of the FAA and that based on past experience, particularly in processing the fare increase applications in 2008, the FAA was found to be working well in general and should therefore be maintained.
"Although the fare adjustment formula has not triggered any comprehensive fare review so far, it has enhanced the responsiveness and objectivity of the fare adjustment process, to the benefit of bus operators, passengers, and the general public," the spokesman said.
Under the FAA, the Government will continue to monitor the formula outcome on a quarterly basis and will proactively initiate a comprehensive fare review if the formula outcome reaches the -2% threshold.
In assessing the reasonable rate of return to franchised bus operators, the Government will continue to make reference to 9.7% rate of return on average net fixed asset (ANFA). The 9.7% rate of return on ANFA will continue to serve as the point for triggering the passenger reward arrangement.
"The FAA for franchised buses will be reviewed again in three years' time. This will allow us sufficient time to gain more experience in applying the FAA in assessing fare adjustments," the spokesman added.
The Government consulted the Legislative Council Panel on Transport and the Transport Advisory Committee (TAC) in October 2009. Members of the panel and TAC generally supported the proposed way forward, particularly the recommendation that a fuel element should not be added to the fare adjustment formula.
Details of the FAA are set out in the Legislative Council Brief issued today. The paper has been uploaded to the Transport and Housing Bureau's website www.thb.gov.hk .
Ends/Tuesday, December 8, 2009
Issued at HKT 16:09
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