The projections in Annex D continue to show a relatively low return on average net fixed assets (the yardstick used in measuring the profitability of other major public transport operations), going from only 1.5% in 1979-80 and reaching a maximum of 4.5% in 1981-82. The ratio of net surplus to gross revenue will be raised from the 1979-80 projected level of about 3.3% to about 14. 9% in 1980-81, and 15.6% in 1981-82. If the projections are accurate, this would be about the same as the ratio at the last fares increase in 1974, when the intention was to raise it to about 14%.
Standards of service and other factors
10
A number of other factors have been considered in the context of this exercise. The se include:
(a) The KCR track is now undergoing a major reconstruction
which will lead to double-tracking and electrification at the end of 1982. This will allow many more trains to be run and will provide a fast, comfortable and air- conditioned service. But during the next three years, the existing service will be considerably stretched as it has already reached its capacity in terms of passenger traffic at peak periods. Additionally the servive will, on a number of occasions, be disrupted because of track work.
(b) Once the electrified service is available, fares will
certainly have to go up substantially in order to reflect the cost of the new and much improved system, although levels cannot be accurately forecast at present. There - fore, despite the inconvenience noted above, it would not be sensible to hold fares at an artificially low level now only to impose a large increase in 1982.
Transport Advisory Committee
11
The Transport Advisory Committee has been consulted. original proposal put to the Committee was for an increase of about 20% on passenger fares and 15% on freight rates on the understanding that a further increase would be needed before electrification. The TAC considers, however, that these increases were too low in view of rising operational costs, the predicted low levels of return, the much higher increases recently approved for the Hong Kong and Yaumati Ferry Company, and applications from the Bus Companies currently under consideration. The Committee was also concerned at the prediction that
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