XN000022-1975-07-30 — Page 9

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WEDNESDAY, JULY 30, 1975

PROFIT CONTROL SCHEME FOR BUS COMPANIES

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ADDITIONAL MEASURES TO SAFEGUARD THE INTERESTS OF THE TRAVELLING PUBLIC WILL BE INCORPORATED IN THE PUBLIC OMNIBUS SERVICES BILL WHICH GIVES THE GOVERNMENT WIDE POWERS OVER KMB'S AND CMB'S OPERATIONS WITH THE AIM OF IMPROVING BUS SERVICES IN HONG KONG.

AT THE SUGGESTION OF UNOFFICIAL LEGISLATIVE COUNCIL MEMBERS, BILL WILL BE AMENDED IN PART TO PROVIDE LEGISLATIVE MACHINERY TO REGULATE THE PROFITS OF THE TWO BUS COMPANIES.

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UNDER THE PROFIT CONTROL SCHEME, THE TWO COMPANIES WILL HAVE TO SET UP A DEVELOPMENT FUND WHICH IS DESIGNED TO ENSURE THAT EXCESS PROFITS EARNED IN A BOOM YEAR WILL NOT BE LAVISHLY DISTRIBUTED TO SHAREHOLDERS BUT WILL BE RETAINED WITHIN THE BUS OPERATION TO BE USED FOR A VARIETY OF PURPOSES, INCLUDING CAPITAL EXPANSION OR TO WARD OFF OR AT LEAST DELAY FARE INCREASES IN BAD YEARS.

THUS IF PROFITS DROP BELOW THE PERMITTED LEVEL STIPULATED IN THE FRANCHISE, THE DEFICIENCY CAN BE MADE GOOD BY DRAWING MONEY OUT FROM THE DEVELOPMENT FUND.

THE DEVELOPMENT FUND WILL ALSO ENABLE THE BUS COMPANY TO OBTAIN CASH AT A PRESCRIBED RATE OF INTEREST TO BE SPECIFIED IN THE FRANCHISE TO BUY NEW BUSES, FOR INSTANCE.

COMMENTING ON THE SCHEME, THE SENIOR UNOFFICIAL MEMBER, DR. THE HON. CHUNG SZE-YUEN, SAID HE DID NOT WANT TO GIVE THE IMPRESSION THAT THE SCHEME WAS PERFECT. IT IS QUITE FAR FROM IT, HE SAID.

IN ORDER TO SAFEGUARD THE INTERESTS OF THE TRAVELLING PUBLIC, IT WAS NOT SUFFICIENT TO CONTROL ALONE THE RETURN ON FIXED ASSETS.

+EQUALLY, IF NOT MORE IMPORTANT, IT IS NECESSARY TO CONTROL FURTHER THE ACQUISITION, UTILIZATION AND DISPOSAL OF THE FIXED ASSETS,+ HE SAID.

IN THIS REGARD, HE WELCOMED THE PROVISION IN THE BILL FOR THE GOVERNOR TO APPOINT TWO ADDITIONAL DIRECTORS TO THE BOARD OF DIRECTORS OF EACH BUS COMPANY TO LOOK AFTER THE INTERESTS OF THE PUBLIC.

THE UNOFFICIALS ALSO RECOMMENDED THAT A CLAUSE IN THE BILL WHICH PROVIDES FOR A LEVY ON PROFITS BE DELETED. IN THEIR VIEW, IT WAS CONCEPTIONALLY WRONG TO PAY INTO GENERAL REVENUE EXCESS PROFITS ARISING FROM THE OPERATION OF A PUBLIC UTILITY.

AN AMENDMENT TO DELETE THIS CLAUSE IS TO BE MOVED BY THE ATTORNEY GENERAL WHEN THE BILL COMES UP IN COMMITTEE.

IN GENERAL, THE UNOFFICIALS FELT THAT THE BILL +CONTAINS CONSIDERABLE TEETH TO ENABLE THE GOVERNMENT TO ENSURE THAT WE GET A GOOD BUS SERVICE.+

/HOWEVER, THEY .....

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