MTR trims fare rise in line with inflation

PUBLISHED : Friday, 29 April, 2011, 12:00am
UPDATED : Friday, 29 April, 2011, 12:00am


The MTR yesterday lowered its fare rise planned for June by a slight margin - 2.3 per cent to 2.2 per cent.

The surprise adjustment was made because Hong Kong's inflation turned out to be not as severe as first thought. It is not that inflation has improved, but rather that officials decided to adjust the weighting of the CPI's components.

The MTR Corporation uses the index as a key reference for adjusting fares. Meanwhile, officials adjust the index periodically to reflect changes in households' spending patterns. For example, in the latest change to the index, the weights of alcohol and tobacco have been reduced, but food and housing have been raised.

Within hours of the CPI adjustment being announced the MTR said it would lower its fare rise by 0.1 percentage point, to 2.2 per cent. Kowloon Motor Bus, which is set to raise its fares by up to 3.6 per cent from May 15, said it would not follow suit.

Acting commissioner for census and statistics Lily Ou-yang denied that the index changes were made to make inflation look less serious.

'Despite the revisions, the general upward trend in consumer prices for the first quarter of 2011 is still observed,' she said.

According to the new formula, inflation for December should be 2.9 per cent, instead of the 3.1 per cent previously based on household survey findings in 2004-05.

The composite consumer price indices - which reflect inflation - for the first three months of this year were therefore adjusted to 3.4 per cent, 3.6 per cent, and 4.4 per cent respectively, compared with 3.6 per cent, 3.7 per cent, and 4.6 per cent as based on the previous data.

MTR fares are reviewed every year under a formula that, in addition to the inflation rate, also takes into account a nominal wage index for the transport sector.

A KMB spokesman said bus companies adopted a different mechanism to the MTR Corp when determining fare adjustments.

A Transport and Housing Bureau spokesman said it was aware of the MTR and KMB's decisions but declined to comment further.

Richard Tsoi Yiu-cheong, a spokesman for the Coalition to Monitor Public Transport and Utilities, was dissatisfied. 'There is basically no basis for the MTR to increase fares. It made a huge profit last year.'

According to the Census and Statistics Department's latest survey, the share of household spending on housing has increased to 31.6 per cent from 29.2 per cent in the 2004-05 survey, and that on food to 27.5 per cent from 26.9 per cent.

Meanwhile, alcoholic drinks and tobacco saw a drop, with an average household spending 0.6 per cent of its income in this category, down from 0.9 per cent in 2004-05. The proportion of spending on clothing and footwear also fell, from 3.9 per cent to 3.5 per cent.

Independent economist Kwan Cheuk-chiu, formerly of Chinese University, said revisions would allow a more accurate assessment of the inflation situation.