SMRT queries council’s ROTA fare hike decision

(SINGAPORE) Singapore’s SMRT, which operates most of the city-state’s subway system, said yesterday that its relatively high return on assets was due to prudent management and should not be used as a reason to keep train fares unchanged.

‘By using ROTA (return on total assets) as a criterion not to grant a train fare adjustment, it could be interpreted as a disincentive for good performance,’ SMRT deputy president and chief operating officer Yeo Meng Hin told Reuters in an e-mail.

Mr Yeo’s comment followed the Public Transport Council’s (PTC) move last week to reject its application to raise train fares, citing SMRT’s ROTA of 11.4 per cent last year, which was higher than that of other transport companies in the region.

SMRT said it was ‘reviewing the matter’ when asked if it planned to appeal the council’s decision or seek clarification as to what constituted an acceptable return on assets.

According to the council, SMRT’s return on assets exceeded those of companies, such as Hong Kong’s Transport International Holdings and MTR Corp and Singapore-based SBS Transit and Singapore Airlines, which ranged from 4 to 9.7 per cent.

SMRT also noted its high return on assets was partly due to its asset-light structure as it did not own the city-state’s subway stations and rail tracks. The company is, however, required to maintain these assets and pay the government a licence fee of one per cent of gross annual fare revenue.

Singapore allows transport operators to apply for fare increases each year using a formula based on changes in the consumer price index and average monthly earnings in the city-state minus 0.3 percentage point for productivity increases. — Reuters

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