South China Morning Post – 1 August 2011
Hit by soaring fuel prices, a few transport operators have called for government subsidies to support their operation one way or the other. Last week, the holding company of Kowloon Motor Bus (KMB) issued a profit warning in the coming months despite a 3.6 per cent fare increase in May. It suggested the government inject what it called “seed money” in a fund to buffer oil price changes and to ease pressure for future hefty fair increases. The Star Ferry appears to be following suit, calling for similar subsidies to avoid bigger fare rises.
The proposals, if adopted, may set a dangerous precedent for taxpayers subsiding private business. The two transport operators are not the only victims of rising oil prices. Everywhere enterprises have to streamline operations as well as exhaust cost-cutting and revenue measures to keep businesses viable. But having said that, KMB has reasons to worry in that any fare adjustment requires approval from the Executive Council. The process is a protracted political tussle and there is no guarantee they will get what they want. For instance, the increase sought by KMB was slashed from 8.6 to 3.6 per cent by the government, The decrease in passenger figures, from 2.64 million a day in 2009 to 2.55 million in the first half of this year, also adds uncertainty to its bleak outlook.
There have been suggestions that the fund could be used to make up for the gap in the fare increase sought and eventually approved. Apart from a government injection, the fund could be financed by KMB profits when its return exceeds a certain level. The proposal appears to be attractive at first glance. It may spare passengers hefty increases. But if such a buffer is to be set in place, the company may lose its incentive to enhance competitiveness and performance because of such a fallback. Besides, if business prospects are as bleak as what KMB has estimated, it seems unlikely that the company will be in a position to contribute to the fund.
The government has rightly quashed any hopes of such an ill-conceived proposal being taken further. It has asked a legitimate question – why should taxpayers subsidise bus passengers? KMB warned that if no action is taken the unavoidable outcome will be that the company folds. Such threatening remarks will not help to win it public support in tackling the difficulties it is facing.
The bus operator says 60 per cent of its routes are losing money. However, any plans to merge underused routes may cause inconvenience to passengers and face opposition. But half-empty buses running on the road are both wasteful and polluting. It is to be hoped that public opinion will now swing to support route rationalisation, an essential step to better utilise its 4,000-vehicle fleet.