The money that people pay for using water is enough to cover only the operations of national water agency PUB and the depreciation of its water works, pipelines and water reclamation plants, Finance Minister Heng Swee Keat said yesterday.
The annual surpluses PUB gets are transferred to its reserves to finance its plants and equipment, he told the House, addressing the issue of the water price hike that surfaced throughout the Budget debate.
“The Government pays for part of the total cost of securing a safe and clean supply of water for our people and businesses,” he added, as he underlined the strategic value of water and updated members on plans for investments in the water system.
PUB intends to invest $4 billion on additional water infrastructure in the next five years.
The sewerage network will be improved as well.
A deep tunnel sewerage system, costing more than $4 billion, will be completed in 2025.
Another $3 billion will be spent on other sewerage network projects, and to strengthen the resilience of the water supply, in the next five years.
These expenses exceed the revenue from the water conservation tax, which is expected to be about $1.6 billion in the five-year period, he added.
Over the past three days, MPs had voiced residents’ concerns that business and living costs were expected to go up with the 30 per cent hike in water price, which will take effect in two phases, starting in July this year.
Others, however, stressed that water is a precious resource as Singapore’s existence hinges on it, and that the price of water should reflect its value.
Read Also: Water price hike necessary, but why now?
“Water sufficiency is a matter of national survival,” Mr Heng said, as he noted how founding Prime Minister Lee Kuan Yew “obsessed over water since the Separation Agreement”.
“Securing a sustainable water supply for Singapore has been an all- consuming pursuit of the Government since Independence. We lodged our water agreements with the United Nations, invested in a strong defence force and developed strong capabilities in water technologies,” he added.
“Singaporeans have enjoyed uninterrupted and high-quality drinking water through rainy weather and droughts alike. This is not mere good fortune or our birthright. Rather, it is the result of long-term planning, a can-do attitude, innovation and sound policy,” he said.
Mr Heng reiterated a point Environment and Water Resources Minister Masagos Zulkifli made on Tuesday, that the cornerstone of Singapore’s policy on water is pricing it on sound economic principles to reflect its “long-run marginal cost” – that is, the cost of supplying the next available drop of water, which is likely to come from Newater and desalination plants.
“This ensures that users will conserve water, and we can make timely investments in the water system,” he said.
Yesterday, Ms Sylvia Lim (Aljunied GRC) of the Workers’ Party asked why a proposed carbon tax will be implemented only in 2019, but Singaporeans were not given a similar two-year notice for the increase in water price.
Read Also: Price hike reflects scarcity value of water: Masagos
Mr Heng said the carbon tax is new and it will take time to study carefully the details before rolling it out.
“A more fundamental point is whether Ms Lim agrees that water is of strategic significance and that we should each do our part,” he added.
See water price hike in perspective, says PM Lee
Prime Minister Lee Hsien Loong joined the discussion on the water price hike with a Facebook post yesterday, saying he hoped the debate in Parliament on the issue will remind Singaporeans of the value of water:
“The water price increase has triggered sharp reactions from Singaporeans. Two ministers – Chan Chun Sing and Masagos Zulkifli – spoke about this in Parliament yesterday(Wednesday).
They explained why water is an existential issue for Singapore, and why this price increase is unavoidable.
Singapore is an island, yet we are one of the most water-stressed countries in the world.
We have enough water today only because of our unremitting efforts since independence. For us, water will always be a strategic resource, and a matter of national security.
The Pioneer Generation knew this. So do the generations of servicemen and women who have defended Singapore.
In this situation, we have to price water properly.
Then every time we turn on the tap, we are conscious of how precious each drop is.
Read Also: Water price hike hot topic on Day 1 of Budget debate
We last revised water prices in 1997 – a long time ago. Since then, we have developed Newater.
We have also invested in desalination, which is cheaper than before but still expensive.
We need to build more Newater and desalination plants.
That is why the cost of producing water has gone up, and tariffs must rise.
We should see the 30 per cent increase in perspective.
Read Also: Budget 2017’s water price hike: What you’re not hearing about the 30% increase
Many households will get additional U-Save rebates.
So one- and two-room HDB households will not see any nett increase at all.
For most other HDB flats, the nett increase will only be between $2 and $11 per month.
For three-quarters of businesses, water bills will go up by less than a $1 per day ($25 per month). Minister Masagos shared these in his speech.
I hope this public debate reminds us how important and valuable water is, and how we can all help to conserve water, so that we always have enough water in Singapore.”
5 KEY QUESTIONS ON WATER
1. WHY MUST THE PRICE OF WATER RISE?
The price of water has to reflect what is called the long-run marginal cost (LRMC) – that is, the cost of supplying the next available drop of water.
This is likely to come from Newater and desalination plants.
As there is a limit to recycling used water in Newater plants, three desalination plants are being built within the next three years.
As more used water is reclaimed for Newater, the liquid waste is more difficult and costly to treat.
Building pipes to deliver water has also become pricier, as Singapore becomes more built up.
Pricing water right will ensure users conserve it, and enable investments in water infrastructure.
2. WHY HIKE THE PRICE NOW?
The price of water has not gone up in 17 years, since 2000. There is never a good time to raise prices, noted Finance Minister Heng Swee Keat.
But the costs of producing water are rising. PUB plans to invest $4 billion in additional water infrastructure over the next five years.
The Government is also making investments in the sewerage network.
This includes the Deep Tunnel Sewerage System, which will be ready in 2025 and will cost more than $4 billion.
Another $3 billion will also be spent on other sewerage network projects, and to strengthen the resilience of the island’s water supply.
Also, water levels in Johor’s Linggiu Reservoir, from which Singapore draws its water, have been falling in recent years, and climate change could worsen matters.
3. HOW DID 30 PER CENT FIGURE COME ABOUT?
The Government still needs to build more desalination plants and Newater plants.
So details on the costs involved in aspects of water production are commercially sensitive, and revealing specifics could prejudice future bids.
But Environment and Water Resources Minister Masagos Zulkifli told MPs that even with the 30 per cent hike, the price of water would be below cost.
4. HASN’T TECHNOLOGY HELPED?
Technologically, Singapore has squeezed everything it can from the current water processing technology.
It will take several more years to achieve the next breakthrough and bring it to a deployable scale.
5. WOULDN’T THERE BE A KNOCK-ON EFFECT ON OTHER COSTS?
The price hike translates into 75 per cent of businesses seeing an increase of less than $25 per month in water bills – or less than $1 a day.
Some businesses have said they will not increase prices.
Extra U-Save rebates for households means those in one- and two-room HDB flats will not see any increase on average.
For other HDB flat types, monthly water bills will go up by between $2 and $11 per month.
Overall, spending on water will remain at about 1 per cent of household income for most families.
ziliang@sph.com.sg
This article was first published on March 3, 2017.
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