The MTR is making its annual fare adjustments in accordance with the fare adjustment mechanism. In short, the company can adjust its fares according to a formula based on publicly available statistics. This year's increases are expected to be 4.3 percent. As in previous years, MTR fare adjustments have attracted much criticism. Like an annual ritual, some disgruntled "concerned" groups have come out and criticized it.

To the public, any price increase, apart from to their own wages, is unpopular. Hence, it is not easy to assess MTR fare increases fairly. On the one hand, we don't want public transport fares to increase. On the other hand, the MTR is not a charity; it must consider the interests of its shareholders. Moreover, the government is the largest MTR shareholder. These factors combined naturally provoke considerable debate on the annual MTR fare adjustment.

Many commentators note that as the government is the major MTR shareholder, it should be able to exercise its right to vote. If it did this MTR fare increases would be low. Superficially, this argument seems logical. The government holds a 76 percent stake in the MTR. And it could, in theory, play a major role in decisions concerning the MTR.

It could certainly influence the MTR's fare policies. However, when the MTR went public in the early 2000s, the government undertook to remain a silent shareholder in MTR operations. Consequently, apart from retaining the right to appoint some MTR board members, the government has no right to vote.

Under such circumstances, it is inappropriate for the government to interfere in MTR fare increases because it has no firm legal grounds to do so. The public does not understand the complexity of these issues and so inevitably blames the government.

Worst still, certain commentators insist on stressing the fact that the government is the dominant MTR shareholder. This reinforces the mistaken belief that the government has again mishandled the issue of MTR fare increases. People don't realize there are restrictions on the extent to which the government can influence things. Based on previous experience, the government is only permitted a passive role.

Another issue is the rationale behind the MTR fare increases. It is naturally acceptable for businesses to seek profit. However, this does not mean doing so is without its problems - particularly when a profitable company increases its prices every year. Nevertheless, the MTR can do this as the fare adjustment mechanism is legally binding.

According to the mechanism, the inflation rate and transport sector wage increases each account for 50 percent of the calculated fare increases. From this percentage, a productivity factor of 0.6 percent is then subtracted. According to the mechanism, inflation only constitutes calculated values. Hence, generally MTR fare increases must remain lower than the rate of inflation. Even though the adjustment mechanism calculations are designed to include inflation, this does not mean increases below the inflation rate are acceptable.

From the MTR's perspective, the increases are small, lower than the inflation rate. However, it mustn't be forgotten that an organization's pricing decisions don't have to be inflation-linked. Indeed, prices charged by numerous organizations have not changed over the years due to other constraints. When the MTR benefits from the current mass transit strategy, which fully protects its profits, the MTR's fare increases deserve public criticism.

(HK Edition 04/02/2015 page10)