Run a railway and forget the maths

The fare adjustment mechanism followed by the MTR Corporation, of which the government is the major shareholder, does not take into account public perceptions of profit and performance. Therefore intense public criticism over a construction scandal at the Sha Tin-Central rail link, severe service disruptions and a collision between two trains during signalling testing, alongside a profit of more than HK$11 billion, are not obstacles to the formula for fare increases. As a result, based on data that does count, from the transport workers’ wage index and the composite consumer price index, the company will raise its fares by 3.3 per cent from June.

To reduce the impact on commuters, the MTR Corp has announced a 3.3 per cent fare rebate for Octopus card holders until the end of the year. Then the higher fares will become the effective base on which the next rise is calculated. The rebate, under a deal with the government that will cost HK$225 million this year, has not placated lawmakers. They argue that the MTR Corp’s operational and engineering performances do not warrant a fare rise, and have called for it to be scrapped. The company argues that the fare adjustment mechanism ensures it has stable revenue to cover rising operational expenses and investment in renewal and replacement of network assets, such as signals and rolling stock. It may also be true that the mechanism provides a fair reflection of inflation.

That said, there is nothing to prevent the mechanism from being reviewed from time to time, or even held over in special circumstances. There is no question that the current circumstances are exceptional, as evidenced by a record fine of HK$25 million following the collision that stopped Admiralty-Central services on one line for 48 hours, and the timing of the fare rise is unfortunate.

Based on the adjustment formula, the MTR Corp should have been able to increase fares by 3.6 per cent, but a capping provision limited it to maximum of 3.3 per cent, leaving the remaining 0.3 per cent to be recouped later. The company should forget about trying to explain the maths to a weary public, and focus on restoring confidence in its core business – running a railway.