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LCQ19: MTR fare adjustment and concessions

     Following is a question by the Hon Wong Sing-chi and a written reply by the Acting Secretary for Transport and Housing, Mr Yau Shing-mu, in the Legislative Council today (May 30):


     The MTR Corporation Limited (MTRCL) has increased its fares under the Fare Adjustment Mechanism (FAM) for three consecutive years since 2010, with an accumulative rate of increase of about 10%.  MTRCL will increase its fares again this year and the rate of increase is 5.4%.  In this connection, will the Government inform this Council:

(a) given the soaring inflation and prices nowadays, whether it knows if MTRCL will consider putting its fare increases on hold or adjusting its fares downward with a view to fulfilling its corporate social responsibility and alleviating the burden on the public; if it will, the details; if not, the reasons for that; and what better ways it has to pass on the benefits to society and improve the livelihood of the general public;

(b) given that quite a number of members of the public have indicated to me that the promotional schemes introduced by MTRCL in the past, such as "Ride $100 Get 1 Free" introduced in July 2011, did not bring them real concessions and benefits, whether it knows:

(i) the details of the concession schemes to be introduced by MTRCL this year, the amount involved and the estimated number of beneficiaries;

(ii) if MTRCL will introduce more practical concession schemes (e.g. Day Pass, Weekly Pass and Monthly Pass schemes for all railway lines, and providing "same day return half-fare concessions" to "long-haul" passengers); if it will, the details and the implementation timetable; if not, the reasons for that;

(iii) during the period when the "Ride $100 Get 1 Free" promotional scheme was implemented by MTRCL, the numbers of Octopus cards whose holders did not take enough MTR journeys to spend $100 on their Octopus cards from Mondays to Fridays within a week and the percentage of such numbers in the total number of Octopus cards; among such Octopus cards whose holders did not take enough MTR journeys to spend $100 on their Octopus cards within a week, the numbers of those with an accumulated spending on fares between $90 and $94.90 and those between $95 and $99.90, as well as the percentages of such numbers in the total number of Octopus cards, together with a breakdown by month;

(iv) if MTRCL had consulted the Legislative Council prior to the introduction of each type of concession schemes in the past three years; if it had not, the reasons for that, and if it will adopt such an arrangement in the future; and

(v) the justifications for MTRCL to introduce each promotional scheme in the past three years, and if it had reviewed such schemes; if it had, the details; if not, the reasons for that; and set out the information by year and by title of promotional scheme;

(c) given that when MTRCL increased its fares in 2010, there were around 100 journeys under which Octopus fares were higher than single journey ticket fares, whether it knows the numbers and details of those journeys under which Octopus fares were higher than single journey ticket fares in each of the past three years, together with a breakdown by year and by railway line; and

(d) given that MTR fares and FAM involve major public interests and well-being, whether the Government had, in its capacity as the major shareholder of MTRCL, given any advice to MTRCL on matters relating to MTR fares and FAM in the past three years; if it had, of the details; if not, the reasons for that; and the justifications for the Government to maintain its status as the major shareholder of MTRCL?


     My reply to each part of the question is as follows :

(a),(b)(i) and (ii) Since the rail merger in December 2007, fare adjustment of the MTR Corporation Limited (MTRCL) has been subject to an objective and transparent Fare Adjustment Mechanism (FAM).  The FAM, formulated after extensive discussion in the community and by the Legislative Council (LegCo), has replaced the pre-merger fare autonomy of the MTRCL.

     Under the current FAM, the fare adjustment rate for the prevailing year is determined in accordance with a direct-drive formula based on the year-on-year percentage changes in both the Composite Consumer Price Index (CCPI) and the Nominal Wage Index (Transportation Section) (Wage Index) in December of the previous year, as well as a productivity factor.

     The Census and Statistics Department published the CCPI and Wage Index for December 2011 on January 20 and March 26, 2012 respectively.  With reference to these indices, the computation results of the FAM indicate an adjustment rate of +5.4% in the overall MTR fares for 2012.

     According to the FAM procedures laid down in the Operating Agreement (OA) signed between the Government and the MTRCL in August 2007, the MTRCL has provided the Government with two certificates issued by an independent third party to certify that its fare adjustment is in compliance with the FAM.  As the OA is a legally binding document, the Government will adhere to the contractual spirit while MTRCL will act in accordance with the mechanism and comply with the relevant accounting and notification requirements.

     MTRCL announced the adjusted fares for 2012 on May 25.  It also submitted the relevant paper to notify the LegCo Panel on Transport and the Transport Advisory Committee of the arrangement on the same day.  The new fares will take effect on June 17, 2012 (Sunday).

     Given the relatively high inflation rate at present and thus a heavy financial burden on the local community, the Government shares the view of the public that the MTRCL should, apart from considering its commercial operations, give due regard to its corporate social responsibility.  While providing safe and efficient railway services, the MTRCL should also strive to help the public reduce fare expenses.  Therefore, the Government has urged the MTRCL to take into account the overall macro-economic environment and public sentiment, and implement more and various effective fare concessions so as to address the needs of passengers and alleviate their burden of travelling expenses.

     While MTRCL published the adjusted fares on May 25, at the same time it also announced the offer of the largest package of new fare promotions ever to give back to passengers the full value of the additional revenue it would receive in the year from the 2012 fare adjustment, bringing savings of approximately $670 million to passengers.  These new fare promotions include "Ride 10 Get 1 Free" promotion, Free Child Travel on Weekends and Public Holidays, 10% discount for second journeys taken on the same day, Tung Chung - Hong Kong Monthly Pass, the offer of $20 MTR Shops Coupon to every purchase of Monthly Pass of East Rail Line, West Rail Line and Tung Chung Line as well as more interchange discounts, etc.

     The various types of concessions are effective and substantively address the requests of the public with a view to benefiting different groups of passengers.  Currently, the MTR carries more than 4 million passengers every day, among which 95% of passengers use the Octopus.  All Octopus users, whether they are frequent or infrequent users of the MTR services, taking long journeys or short ones, will benefit from one or more of the promotions.  MTRCL's fare promotions for 2012 are set out at Annex 1.  MTRCL is unable to provide the estimated number of beneficiaries at this moment.

     MTRCL will continue to offer existing fare promotions including Student Travel Scheme, Fare Concession for Children, Fare Savers and other interchange promotions, etc.  It will also continue to offer the existing fare concessions for Elderly and Persons with Disabilities on a voluntary basis.  MTRCL will work closely with the Government on the implementation of the Public Transport Fare Concession Scheme for the Elderly and Eligible Persons with Disabilities so as to enable eligible people to enjoy the concessionary fare of $2 per trip.

     The new promotions to be launched in 2012 are in addition to the existing fare promotions offered by MTRCL.  MTRCL estimated that the value of the total fare promotions for the coming year would exceed $2.3 billion.

(b)(iii) The "Ride $100 Get 1 Free" promotion scheme was introduced from July 4 to December 30, 2011.  This promotion was offered in response to passengers' views at the time, with special focus on benefiting passengers taking long journeys.  

     During the said promotion period, about 5 million free tickets were redeemed by passengers, amounting to a total value of some $65 million.  MTRCL did not conduct any survey on the number of Octopus cards with weekly spending on MTR travel of less than $100.

(b)(iv) In putting together the fare promotions and concessions in the past three years, MTRCL has been listening closely to the views of public including attending the relevant meetings of the LegCo Panel on Transport to listen to the views of LegCo Members, members of the public as well as concern groups regarding MTR fares and fare promotions.

(b)(v) Taking into account the market conditions, MTRCL has been offering various types of fare concessions and promotions for different railway lines and groups of passengers.  It also reviews each promotion regularly with a view to meeting the needs of the market.  The fare promotions and concessions offered by MTRCL from 2010 to 2012 are at Annex 2.

(c) In calculating individual fares, MTRCL has applied the following two guiding principles :

(1) Adjustments to Octopus fares are in units of 10 cents; and

(2) Adjustments to Single Journey Ticket fares are in units of 50 cents (as MTR Ticket Issuing Machines do not accept coins with value lower than 50 cents).

     As the percentage increase of some Single Journey Ticket fares would be quite high with a 50 cents adjustment, MTRCL decided not to adjust some Single Journey Ticket fares.  As a result, some individual Single Journey Ticket fares are slightly lower than their corresponding Octopus fares.

     The details of cases where Single Journey Ticket fares are slightly lower than their corresponding Octopus fares from 2010 to 2012 are at Annex 3.

(d) When the Government initiated the privatisation of the former MTR Corporation (MTRC) (currently refers as "MTR Corporation Limited" (MTRCL)) in 2000, it promised that the Government would remain as the majority shareholder of the MTRCL after the privatisation for at least 20 years and own no less than 50% of shares and votes of the MTRCL. This promise demonstrates the Government's commitment to the long-term development of railway system.  It also assures local and overseas investors as well as credit ratings agencies that the Government is committed to supporting MTRCL's continuing role in the provision of quality railway services and the expansion of the transport infrastructure in Hong Kong.  Currently, the Government owns 76.6% of MTRCL's shares and this fulfills the commitment made by the Government during the privatisation of the MTRC.

     The Secretary for Transport and Housing, the Secretary for Financial Services and the Treasury, and the Commissioner for Transport are serving as the non-executive directors of the Board of MTRCL.

     During the decision-making process of the Board, public officers' views are taken seriously.  But as with other listed companies, all Board members of MTRCL are collectively responsible for discharging the functions of the Board.  The directors must act in good faith on behalf of the MTRCL and apply due diligence when exercising their powers.

     Similar to other members who bring their experience and professional knowledge from their own sectors to the Board, public officers would make good use of their in-depth understandings on public interests and expectations of the community as well as their insights of being the regulator of the transportation sector to advise the Board.  This would ensure that the Board could strike a balance between commercial principles and public interests when making decisions.

     As regards the design of each year's fare promotions of MTR, public officers would reflect the community's requests on fare promotions in the Board and urge the MTRCL to take into account the overall macro-economic environment and public sentiment, and implement more and various effective fare concessions so as to address the needs of passengers and alleviate their burden of travelling expenses.

Ends/Wednesday, May 30, 2012
Issued at HKT 15:36


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