Mr Pritam Singh (Aljunied): Mr Speaker, just two questions for the Senior Minister of State.
First, in 2018, water prices were raised by 30%. The latest announcement by the Government sees them go up by another 18%. Can I ask the Senior Minister of State why such a short interregnum, as compared to the pre-2018 increase, before which prices are going up again for water? Is there any scope, policy space, for the Government to delay this increase with a view towards the profits generated by the authorities vis-a-vis water and the supply of water?
My second question is with regard to the household water consumption patterns. I understand they have been on the down over the past few years, although it saw an uptick during the COVID-19 pandemic – and, understandably so, because most people were at home. With this as a backdrop, can I query the relevance of the water conservation tax as opposed to the Government’s implementation of more water-efficient features for households, which is a more effective policy tool to encourage lower consumption of water and achieve the outcome that the Ministry is looking at with regard to ensuring that every Singaporean sees the first drop of water as a very scarce resource?
So, is there space for the Government to reconsider the utility of its water conservation tax? Is it achieving the policy purpose that is intended? Or are water-efficient features actually a more likely source of realising water savings from household consumers?
Dr Amy Khor Lean Suan: With regard to the first question about the earlier increase of 30% in 2017 and the current increase of 18%, as I have explained earlier in my reply, the latest revision in water price which would actually only take effect from 1 April 2024 and not now – is really due to external cost pressures. And I have listed the increase in costs: due to electricity cost, which increased by 37%, and construction cost which increased by 35%. The electricity cost increase is just from tariff increase. Actual increases could be higher, depending on when we contracted our energy contracts and so on. And then, there are maintenance cost increases due to increased manpower as well as chemical costs.
So, that is the reason why the cost of producing and supplying the next drop of water has exceeded our current water price and there is a need to have a price revision in order to ensure that PUB can continue to sustainably cover its operating costs as well as continue to make investments in water infrastructure to ensure reliable water supply as well as water security. And we will continue to review our water price regularly, taking into account, of course, costs and other factors.
The Member was talking about profits. Let me clarify that, actually, if we look at the financial statements of PUB, in 2020, net operating income was positive, $10 million. But in FY2021, net operating income, before Government grants, was negative $109 million and it has actually widened to negative $264 million. After Government grants, it has become positive. But if we look at the revenue, the net income generated, whatever is generated, is actually ploughed back, reinvested, to fund the operating expenditure of the water system and, as I have said, in terms of ongoing investments, as well as additional investments. In fact, it is not enough.
By way of illustration, if you accrue the net income after Government grants for fiscal years 2018 to 2022, it is $1.5 billion. Some people talk about $2.4 billion and so on, of net surplus. Between 2018 and 2022, it is $1.5 billion, but that is really needed, as I have said, to fund the operating expenditure as well as investments. But it is not enough. In fact, the capital investments required then to meet future demand was $3 billion.
Therefore, PUB has had to, in addition, borrow from the market and issue bonds. For instance, last year, in 2022, we issued $800 million in green bonds. We borrowed from the market for long-term infrastructure projects. So, there is no profit; everything is actually reinvested or used.
With regard to whether it is better to use water efficiency features to incentivise water conservation efforts instead of the water conservation tax, first of all, the water conservation tax, is a tax, as the Member has rightly noted, to reflect the scarcity value as well as to incentivise consumers to use water wisely. But the water tariff, together with the water conservation tax, is actually part of the price of water, which reflects the cost of producing and supplying the next drop of water. So, it is actually part of the water price. Then, the waterborne tax is a tax contribution to the used water system.
Speaker, maybe I would just add, too – because I did not reply to water efficiency features – I would say that both are needed.
Ministry of Sustainability and the Environment
4 October 2023
https://sprs.parl.gov.sg/search/#/sprs3topic?reportid=oral-answer-3353
Office of the Leader of the Opposition 