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TUESDAY, DECEMBER 20, 1988
TAC BRIEFED ON BUS COMPANY PROFIT CONTROL SCHEME
THE TRANSPORT ADVISORY COMMITTEE (TAC) WAS BRIEFED ON THE OBJECTIVES AND OPERATION OF THE PROFIT AS APPLIED TO THE FRANCHISED BUS COMPANIES.
MEMBERS NOTED THAT THE MAIN OBJECTIVES OF THE SCHEME ARE TO :
TODAY (TUESDAY)
CONTROL SCHEME
PROFIT CONTROL
* ENSURE THAT PASSENGERS GET FULL AND RELIABLE SERVICES;
*
*
ENSURE THAT PASSENGERS GET THE SERVICES AT REASONABLE PRICES;
KEEP THE COMPANIES
FINANCIALLY VIABLE SO THAT THEY COMPETE WITH OTHER COMMERCIAL ORGANISATIONS FOR FUNDS;
CAN
ENSURE THAT SHAREHOLDERS GET A REASONABLE FINANCIAL RETURN ON THEIR INVESTMENT, TO ENCOURAGE FURTHER INVESTMENT;
ACHIEVE THE PRECEDING OBJECTIVES WITHOUT ANY DIRECT FINANCIAL CONTRIBUTION FROM PUBLIC FUNDS, AND WITH THE MINIMUM INTERFERENCE FROM THE GOVERNMENT IN THE OPERATIONS AND MANAGEMENT OF THE COMPANIES.
ΤΟ ENCOURAGE
LONG-TERM FREQUENT,
THE PROFIT CONTROL SCHEME IS DESIGNED INVESTMENT BY THE COMPANIES TO MEET FURTHER DEMAND FOR WELL-REGULATED AND COMFORTABLE BUS SERVICES, AND AVOID SUDDEN CHANGES IN THE LEVEL OF REQUIRED IMPROVEMENTS OR FARE LEVELS.
BY MEANS OF THE FORWARD PLANNING PROGRAMME SUBMITTED BY THE BUS COMPANIES EACH YEAR, THE GOVERNMENT CAN ENSURE THAT THE CAPITAL EXPANSION PROPOSALS OF THE BUS COMPANIES ARE PROPERLY JUSTIFIED AND SUFFICIENT TO MEET INCREASING DEMAND AND PREVENT UNNECESSARY EXPANSION OR DELIBERATE OVER-INVESTMENT BY THE BUS COMPANIES TO BOOST THEIR PROFITS.
THE PERMITTED RETURNS OF 15 PER CENT FOR THE CHINA MOTOR BUS COMPANY (CMB) AND 16 PER CENT FOR THE KOWLOON MOTOR BUS COMPANY (KMB) ARE SOMETIMES CRITICISED AS BEING TOO HIGH.
ON THIS POINT, MEMBERS NOTED THAT THE PERMITTED RETURNS REPRESENT THE GROSS RETURNS TO THE COMPANIES AND ARE SUBJECT ΤΟ COMPULSORY DEDUCTIONS, FOR CERTAIN INTEREST PAYMENTS AND THE INTEREST ON THE DEVELOPMENT FUND BALANCE UNDER THE TERMS OF THE FRANCHISES.
IN PRACTICE, THE EFFECTIVE OR NET RATES OF RETURN ACHIEVED OVER THE LAST 10 YEARS ARE MUCH LESS. FOR KMB, THE RATE OF RETURN HAS BEEN AROUND 13.4 PER CENT, AND FOR CMB IT HAS BEEN ABOUT 14 PER CENT.
/MEMBERS ALSO