A short cut

PUBLISHED : Saturday, 30 July, 2011, 12:00am
UPDATED : Saturday, 30 July, 2011, 12:00am


The proposal by Kowloon Motor Bus that the government set up a fund to subsidise public transport fares to counter soaring fuel prices and increased operating costs has stirred debate. I opposed the move because, based on the principles of a free-market economy, it would be unreasonable for the company to press the government to help steer it through a bad patch.

A fellow columnist in this paper suggested that I should step into the shoes of KMB's senior management to see if I could rescue it from this financial quagmire.

Jake van der Kamp said the existing fare mechanism had done little to guarantee a reasonable rate of return for franchised bus operators because it only took into account the change in the consumer price index and wages for transport workers, and ignored fuel and other costs.

Of all those expenses, the highest is the price of fuel. Even though it may not be easy for the company to hedge its fuel costs on the futures market, there is already a tax exemption on diesel to help reduce operating costs. No matter how we look at it, it is still unreasonable for KMB to ask for a government bailout.

Van der Kamp was sympathetic towards KMB, saying it had to tackle increased operating costs, but he forgot that the company has other income on top of bus fares. Apart from the huge profits it has reaped from the sale of some of its depots, KMB is doing quite well from the additional non-fare income derived from its RoadShow advertising arm.

To run a sound business, a good operator must know the fundamental principles of how to maximise income and minimise expenses. KMB has taken the profit-making RoadShow business out of the bus operating structure, and thus discounted it as part of its income. At the same time, it has failed to streamline operations. Therefore, it's fair to say the company has failed abysmally on those two basic principles.

KMB is taking the short cut by asking for a government subsidy. After all, it is much easier than streamlining routes to reduce operating costs because that might draw strong opposition from local residents and hence district boards.

In fact, overlaps in bus routes not only have a negative impact on KMB's business, they also affect society as a whole.

Having too many buses on the road causes traffic jams and air pollution. Reducing the number of buses and bus stops might bring inconvenience to commuters, but the long-term benefits are immeasurable.

To tackle the root of the problem, the only way forward is for our main transport system to be publicly funded. That way, we would avoid high transport fares. We have publicly funded housing, so why can't we do the same for public transport?

Instead of setting up a fare stabilisation fund, as proposed by KMB, the government should use the money to take over all three bus companies or follow the MTR model by acquiring a controlling stake. After the takeover, it could lift the tax exemption on diesel to increase revenue. This will definitely be a win-win situation for all.

Albert Cheng King-hon is a political commentator. taipan@albertcheng.hk