Outcome of the early review of the MTR Fare Adjustment Mechanism
Profit Sharing Mechanism
Mr CHAN Chun-ying noted that under the Profit Sharing Mechanism (“PSM”), MTRCL would share its profits with passengers by providing fare concessions based on its underlying business profits each year, but there was a profit sharing limit currently at $15 billion. He worried that in case MTRCL manipulated to credit its huge profits derived from property developments under one single year, the underlying business profits in that year might far exceed the profit sharing limit and the profits to be shared through PSM would be disproportionate. As such, he suggested further raising or removing the profit sharing limit, while keeping the flat increase for each tier under the pre-determined tiered table at about 2%.
CD/MTRCL assured members that the booking of profits was subject to vigorous accounting procedures, and there was no cause for MTRCL to credit the profits from property developments in one single year. STH added that the underlying business profits counted towards PSM comprehensively included all MTRCL businesses. After the FAM review, the profit sharing limit had significantly increased from $13 billion to $15 billion having regard to the past financial performance of MTRCL. The profits shared with passengers at each tier were also expanded. STH said that the above views of Mr CHAN Chun-ying could be further considered in future FAM reviews.
Service Performance Arrangement
Mr CHAN Chun-ying suggested specifying a critical number of service disruptions occurred in a year, exceeding which the penalties imposed under the Service Performance Arrangement (“SPA”) should be doubled or even tripled. Mr Nathan LAW suggested imposing penalties for service disruptions of a duration shorter than 31 minutes.
In response, STH said that while MTRCL should be held accountable for serious service disruptions, it should not be fined for disruptions of duration shorter than 31 minutes in order not to put undue pressure on MTRCL’s frontline staff, who otherwise might be tempted or pressurized to rush their repair works, hence putting railway safety at risk. He noted that serious service disruptions were not too frequent over recent years. The Administration would continue to monitor the situation and revisit the relevant issues in the next FAM review as appropriate.