SINGAPORE – The annual deficit incurred by the Land Transport Authority (LTA) to keep public bus services here running has narrowed to a seven-year low of $852 million.

       LTA’s latest financial statements showed that the deficit from public bus operations fell below the $1 billion mark for the first time in six years, down from a high of about $1.2 billion two years ago.

       The drop was driven largely by an increase in fare revenue collected by LTA from public bus rides, and lower fees paid to transport firms contracted to run public bus services here.

       This means fewer tax dollars were needed to fund government subsidies to cover the shortfall for the financial year (FY) that ended on March 31, 2024.

       In Singapore, buses operate under a contracting model, which means the Government owns all operating assets and collects fares. Transport firms such as SBS Transit and SMRT bid for contracts to run bus routes over a fixed period of time for a fixed fee.

       Fare revenue from buses grew to $898 million in FY2023/2024, a rise of about 9 per cent from $821 million previously.

       This was higher than the $862 million collected by LTA in FY2019/2020, before the Covid-19 pandemic struck and public transport ridership took a nosedive.

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       Bus and train ridership has since bounced back, though not yet fully recovered. In the first half of 2024, average daily ridership was estimated to be about 97 per cent of the levels in 2019.

       Bus and train fares also increased over successive years.

       Fares rose by up to four cents in 2021, up to five cents in 2022, and up to 11 cents in 2023. They are set to rise again by up to 10 cents from Dec 28, which will further add to LTA’s coffers.

       Meanwhile, the authority was able to lower the services fees and incentives it pays to bus operators.

       In FY2023/2024, it paid $1.61 billion to bus operators, down from $1.68 billion in the previous year and $1.65 billion in the year before that.

       In all, public bus operations here posted an overall net surplus of $36 million after accounting for government grants, which amounted to $888 million.

       In FY2022/2023, government grants for buses amounted to $1.05 billion. The year before, it was $1.21 billion.

       More broadly, LTA’s total operating expenditure continued to grow in FY2023/2024, crossing $5 billion for the first time.

       This was, however, offset by higher operating income of more than $2 billion.

       As a result, the authority’s total deficit before government grants shrank to $2.79 billion, down from $2.91 billion previously.

       Asked to comment on LTA’s narrowing bus operations deficit, Singapore University of Social Sciences transport economist Walter Theseira said this could be because of leaner bids by bus operators for new contracts, as well as the rationalisation of some bus services.

       In August, Transport Minister Chee Hong Tat noted how average tender prices for bus contracts had fallen by 15 per cent due to increased competition.

       In December 2023, LTA shortened two bus services, 75 and 162, which ran parallel to parts of the Thomson-East Coast Line, and terminated service 162M.

       It also reduced the frequency of service 167, which was supposed to be terminated until public backlash led to a change of heart.

       These changes resulted in annual cost savings of $5.1 million in total, Mr Chee later said.

       However, while public bus services here appear to be on the mend financially, Associate Professor Theseira said this trend will likely be reversed, given the recent decision by the Government to plough up to $900 million over eight years into the new Bus Connectivity Enhancement Programme (BCEP).

       The initiative, which aims to improve public bus connectivity for those living in new housing estates and developments, will expand bus services in a way that is likely to be much less cost-efficient than existing services, Prof Theseira said.

       “BCEP is about improving service quality, even if it costs more,” he added. For instance, the roll-out of bus services in new towns will be sped up, even though ridership may be low.

       An LTA spokesperson told The Straits Times on Nov 1 that lower global fuel prices was another reason for the lower deficit in FY2023/2024.

       Echoing Prof Theseira’s comments, LTA said government subsidies for public transport are expected to remain significant, and will likely increase in the next few years given the introduction of the BCEP, as well as the opening of new MRT stations and rail extensions.

       Unlike buses, rail services in Singapore are largely funded using a profit and risk-sharing framework.

       The Government owns all the assets, but it is the operators that collect the fares, and they pay LTA a yearly licencing charge, which varies depending on profitability.

       If fare revenues are lower than projected, LTA steps in to fill some of the shortfall.

       The only exception is the new Thomson-East Coast Line (TEL), which is being run under a similar contracting model as buses during the initial years of operation.

       LTA’s financial statements do not provide an exact figure for the total amount of grants it provides to cover the cost of rail operations.

       But it has said that more than $1 billion in subsidies are needed each year to keep MRT and LRT services running.

       Of this, about $400 million in grants were used to subsidise TEL operations in FY2023/2024.

       In the longer run, Prof Theseira said, the challenge for LTA is finding the right balance between system costs and service quality.

       He noted how discontent over the pace of recent fare hikes and the slew of MRT breakdowns has fed the perception that bus and train fares are too high for the services being offered, and that fares are being used to provide substantial profits for the operators.

       In reality, public transport fares here are, in Prof Theseira’s view, “grossly insufficient” to cover operating costs.

       Similarly, he said the public has a perception that any attempt to manage maintenance and service costs is a move to increase profits, when these moves are in fact meant to reduce wastage of public funds.

       Prof Theseira warned that if the public is not engaged on these issues, there will be growing pressure on LTA to spend even more on raising public transport service quality without increasing fares, which will widen the gap needed to be filled by taxpayer funds.

       “This may be financially sustainable if we are able to continue generating tax revenue and limit other spending,” he said.

       “But it will pose an increasing burden, especially as we expect to have other costs relating to the ageing population.”