Transport fares have remained unchanged in Beijing for the past seven years despite the city's rising fiscal expenditure, escalating labor costs and expanding public transport network. This reflects transport enterprises' insatiable hunger for government subsidies and shows that the local government has not handled allocation of public funds efficiently.

Of course, the lower the fares the happier the commuters will be. Yet low fares mean bigger loss of fiscal revenue for the government. In contrast, if public transport fares - including hiked fares - are designed properly, they could motivate transport enterprises to earn more revenues by, among other things, improving their services instead of relying on subsidies. Very low fares, as has been the case, may prompt the transport operators to keep the local government happy instead of trying to improve passenger services.

But still the proposed fare hike presents an undeniable problem: financial burden on the low-income group. In this context, it would be fair to say that transport operators do need government subsidies to help this disadvantaged group. But instead of giving subsidies for the benefit of all passengers, the local government should allocate targeted subsidies for low-income people.

In short, the Beijing government and public transport operators have to strike the right balance between the demands of the market and public welfare. And only a pricing mechanism that takes both factors into consideration can help them fulfill this need.

The author is the director of Beijing Transportation Research Center.