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Budget 2017: SMRT, ComfortDelGro to pass on diesel tax savings to taxi drivers

An expert says the move to volume-based duty on diesel fuel is another blow to the sector, which is already facing competition from private car hire services like Grab and Uber.

SINGAPORE: Taxi operators SMRT and ComfortDelGro plan to pass on savings from the reduction of annual special tax on diesel vehicles to their drivers, they told Channel NewsAsia on Tuesday (Feb 21).

This comes a day after Finance Minister Heng Swee Keat had announced a restructuring of the diesel tax system for vehicles and said the annual special tax would go down by S$850 for diesel taxis and S$100 for diesel cars. 

ComfortDelGro did not offer details on how the savings would be passed on, but the managing director of SMRT Taxis and Private Hire Services Tony Heng said: "We will reduce the daily rental rate for diesel taxis and increase contribution to the monthly Medisave top-up scheme for our diesel taxi-hirers."

The new diesel tax system is a shift from a lump-sum tax payment model to a pay-per-use one. Diesel vehicle owners and taxi drivers now have to pay a 10-cent tariff for each litre of diesel pumped. 

“Inevitably, this will increase the taxi companies' and taxi drivers' operating costs,” said transport analyst Lee Der Horng from the Department of Civil and Environmental Engineering at the National University of Singapore.

Prof Lee said the announcement is another blow to the sector, which is already facing competition from private car hire services like Grab and Uber.

“In order to stay competitive in reacting to the competition from private-hire car services, the taxi companies are also reviewing their fare structure. But since the diesel tax is going to be imposed based on usage, this would actually complicate the taxi industry's movements in restructuring their fare structures,” he said.

“I think this will provide further momentum in encouraging taxi companies to change their fleet, or to renew their fleet in adopting more environmentally-friendly vehicles,” he added.

Already, both ComfortDelGro and SMRT have started to introduce hybrid petro-electric cabs to their fleet. SMRT Taxis said eco-friendly taxi models make up nearly half of its fleet and therefore reduces its reliance on diesel fuel.

Currently, less than 10 per cent of cabs in Singapore are hybrids, but almost all of Prime Taxi's cabs are, and the company said the restructuring of the diesel tax system is a step in the right direction.

“The diesel tax, in my point of view, is the first step on the roadmap towards green policies. I hope the Government will do more and eventually let diesel cars exit Singapore,” said Prime Group chairman Neo Nam Heng.