FORMER Land Transport Authority board member Wesley D'Aranjo, in a note to fellow directors in October 1996, described Singapore's taxi system as "dysfunctional".

A decade on, going by the perennial grouses from commuters and cabbies alike, the industry is still puttering along like an old diesel engine. It runs but requires constant servicing and repairs.

Visitors and locals who have lived abroad often compare Singapore's taxi system with Hong Kong's. There, you can hail a cab with no more effort than lifting your arm.

The irony is that Hong Kong has twice as many people as Singapore but fewer cabs than Singapore's 23,000.

So, why can't you get a cab here when you need one?

Now, as the debate on taxi service standards and fare structure rages, and with hints of a fare hike in the air, it is time to ask if we have been treating the symptoms or the disease.

Because whatever changes are planned are unlikely to address the anomalies which have made the Singapore taxi industry a peculiar animal - one which has to be tamed time and again.

Think about it. Singapore has made so many changes to the taxi industry in the last four decades in attempts to fix it.

The free-wheeling "pirate taxis" pre-1970 were done away with in one fell swoop, when the NTUC entered the fray "to improve the livelihood" of drivers.

At the time, the Registry of Vehicles - predecessor of the Land Transport Authority - decided on taxi fares.

When the Public Transport Council was formed in 1987, it took over the role. Then, in 1998, the Government decided that fares should be deregulated.

Since then, taxi companies have been deciding on fares. It is a strange state of affairs. It is like Airbus telling Singapore Airlines how much it should charge for its tickets or an abattoir telling Lawry's how much its ribs should cost.

Taxi companies are car lessors that rent out their fleet to hirers (cabbies). There is a clear conflict of interest when the companies decide how much the cabbies can charge for their services.

Because whatever decision a company makes, it will look after its own interests first. It may have its roots in a cooperative, but ComfortDelGro - the largest taxi firm here - is a listed company led by hard-nosed professionals with an unwavering aim: to increase shareholder value.

The same goes for the second biggest operator, SMRT Corp.

In the past, each time fares were raised, companies raised rental rates (which cabbies pay for use of the taxis). Hence, a fare increase does not filter completely to the taxi driver.

Now, the market mechanism is different because liberalisation has brought forth four new operators.

In this scenario, the market leader's single strongest advantage is its sophisticated high-volume phone-booking infrastructure that is unmatched by others. It has invested millions of dollars in it and is now reaping a tidy return, said to be more than $50,000 a day - it takes a cut each time a cabby takes a phone-booking job.

Hence, even though the double whammy of soaring diesel prices (which have trebled in the last 10 years) and GST-triggered increases in rental rates would be best mitigated by a sizeable hike in the flagdown fare, it is unlikely ComfortDelGro would push for it.

Such a move will soften overall demand for cabs (but not necessarily lower cabbies' take-home pay). The lower demand will mean that those who want a cab can flag down one without having to incur a phone-booking charge.

So, instead of raising the flagdown rate, ComfortDelGro has been giving its hirers rebates and selling them discounted diesel. There are conditions attached to these incentives - unlike an outright increase in fares.

So, a way for the industry to move forward is really to let the cabby community decide on fares. Drivers are the best judge of real demand on the ground.
And it would not be surprising if the consensus is for a substantially higher flagdown rate, with a simplified surcharge scheme to differentiate between peak and non-peak periods. This is simply because demand during peak period is many times that during the non-peak period.

All other surcharges would be redundant in such a market. For instance, cabbies will be willing to go to the airport or to town because there is a ready supply of fares there.

In the end, cabbies will not have to each clock 500km a day just to take home $2,500 to $3,000 a month. They will use far less fuel - good for the environment but bad for operators who sell diesel.

Commuters will then have to be far more discerning when it comes to their transport choices. It is clearly a sign that cab fares are artificially low when four people sharing a cab is almost equivalent to each of them paying a train fare.