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LCQ12: MTR fare adjustment
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     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 (June 20):

Question:

     The MTR Corporation Limited (MTRCL) increased MTR fares in 2010, 2011 and 2012 respectively.  After each fare adjustment, there were situations in which the Single Journey fares for quite a number of fare combinations were lower than their corresponding Octopus faresí@(fare situations).  According to the reply given by the Secretary for Housing and Transport to a question asked by a Member of this Council on June 9, 2010, in fare adjustments, MTRCL applied the principlesí@that "adjustments to Octopus fares are rounded to the nearest 10-cents" and "adjustments to Single Journey fares are rounded to the nearest 50-cents" for the calculation of individual fares, and "some Single Journey fares, most of which are concession fares for children and the elderly, would have a substantial increase if they are to be adjusted by 50 cents.  Therefore, MTRCL has decided not to adjust these Single Journey fares now and address the issue in the next fare adjustment".  Since the approach and principles of the fare adjustments in 2011 and 2012 are identical to those in 2010, 100, 30 and 596 fare situations emerged respectively after the fare adjustments in these three years.  In this connection, will the Government inform this Council:

(a) whether it knows the progress and details (e.g. the number of  fare situations handled and the time required, etc.) of MTRCL's handling of the fare situations each year since 2010; the details and numbers of fare situations not yet handled since the fare adjustments in 2010 and 2011, and set out the information by year and railway line;

(b) given that MTRCL indicated in 2010 that the issue of fare situations would be addressed in the next fare adjustment, whether the authorities have discussed, reviewed and followed up the fare situations with MTRCL with a view to eliminating the differences between the two types of fares; if they have, of the details and effectiveness of their efforts, and set out the information by year (since 2010) and type of efforts; if not, the reasons for that;

(c) given that after the fare adjustments in 2011 and 2012, fare situations have deteriorated when compared with those in 2010, with the number of fare situations in 2012 far exceeding the numbers in 2010 and 2011 (being about 5 times and 20 times of the respective years), whether the authorities, as the major shareholder of MTRCL, have assessed if MTRCL has failed to honour its undertaking at that time as mentioned in (b);

(d) focusing on fare situations, what solutions (e.g. abolition of the fare adjustments of the journeys concerned) the authorities and MTRCL have to solve the problem completely, and of the details of and concrete implementation timetable for each solution; and

(e) whether it has assessed if the fare situations have defeated the original purpose of establishing the Octopus fare system; if it has, of the findings?
 
Reply:

President,

     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, has replaced the pre-merger fare autonomy of the MTRCL.

     Under the current FAM, the overall 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.  As the Operating Agreement (OA) signed between the Government and MTRCL in August 2007 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.

     The Census and Statistics Department published the CCPI and Wage Index for December 2011 on January 20 and March 26, 2012 respectively.  The computation results of the FAM indicate an overall adjustment rate of +5.4% in MTR fares for 2012.  The weighted average (taking into account the patronage of individual fares) of all adjustments to individual journeys must equal to +5.4%.

     According to the FAM procedures laid down in the OA, MTRCL would calculate the individual fares and provide the Government with two certificates issued by an independent third party to certify that its fare adjustment is in compliance with the FAM.

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

     Since the adoption of the existing FAM, MTRCL has applied the following guiding principles when calculating individual fares during fare adjustments:

(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 (MTR Ticket Issuing Machines currently accept coins with value of 50 cents, 1 dollar, 2 dollars, 5 dollars and 10 dollars).

     MTRCL advised that, due to the differences in the units of adjustment to Octopus fares and Single Journey Ticket fares, the percentage increase of some Single Journey Ticket fares (most of which are Child or Elderly Concessionary Single Journey Tickets) would be quite high with a 50 cents adjustment when the above principles are applied in each year's calculation of the individual fares.  MTRCL considered that such increase would be too high and decided not to adjust these fares in the respective years to avoid a substantial increase on the burden of passengers.  The Government noted and understood MTRCL's decision.

     For instance, the percentage increase of some Single Journey Ticket fares in the fare adjustment in 2012 would be quite high with a 50-cent adjustment: there would be a 20% increase if the Child / Elderly Concessionary Single Journey Ticket fare of $2.5 were to be adjusted to $3.0.  MTRCL therefore decided not to adjust Single Journey Ticket fares below $7 this year.  As a result, some Single Journey Ticket fares are slightly lower than their corresponding Octopus fares within the range of 10 cents to 40 cents.  As regards the fare adjustment in 2012, all adjustments to the individual fares are within 10%.

     Based on the information provided by MTRCL, there are around 600 journeys in 2012 under which Octopus fares are slightly higher than those of Single Journey Ticket fares, representing less than 2% of a total of some 40,000 fare combinations.  Therefore, passengers using Octopus will still pay a lower fare than using Single Journey Tickets for most journeys.  MTRCL has uploaded such information to its website for passengers' reference.

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

     The Octopus system provides a simple, convenient, reliable and environmental-friendly electronic fare collection system platform for passengers.  It eliminates the need for passengers to find exact change and saves time.  Overall speaking, the Octopus system can enhance the efficiency of the transportation network.

     Although some individual Single Journey Ticket fares are slightly lower than their corresponding Octopus fares, passengers using Octopus can enjoy more advantages and benefit from various fare promotions for Octopus users offered by MTRCL.  As MTR Ticket Issuing Machines do not accept coins with value lower than 50-cents, the percentage increase of some Single Journey Ticket fares would be very high with a 50-cent adjustment.  Given the number of journeys under which Octopus fares are slightly higher than Single Journey Ticket fares represents less than 2% of the total fare combinations, MTRCL considered that the existing practice has already balanced different views and taken into account various considerations.

     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 íV Hong Kong Monthly Pass and more interchange discounts, etc.

     The various types of concessions are effective and substantively address the requests of the public with a view to benefitting different groups of passengers.  All Octopus users, whether they are frequent or infrequent users of the MTR services, taking long journeys or short ones, can benefit from one or more of the promotions.

     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.

Ends/Wednesday, June 20, 2012
Issued at HKT 12:33

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