Water price hike: Don’t ration info like rationing water

Feb 24, 2017 08.39AM |
 

FINALLY, the PUB has given some answers on the cost of producing water. What was so difficult about that? Does it think that big words such as “resilience”, “sustainability” and “water security” are enough to move people to accept a 30 per cent hike in water price? Or is it waiting for the Committee of Supply debate on the budget of the Ministry of Environment and Water Resources to unveil the figures? In this day and age, it’s not good to let speculation and discontent fester, simply because they can be spread so much faster via the Internet.

So what do we know now? In response to queries from the MSM, it said that in 2000, it cost $0.5 billion to operate the water system. In 2015, it was $1.3 billion. The money was spent on NEWater production, desalination, used water collection and treatment, and the maintenance of the island-wide network of water pipelines, among others. It did not say which contributed the most to rising cost, although one guess would be desalination plants.

PUB also said that from 2000 to 2015, it invested $7 billion in water infrastructure, and it expects to spend another $4 billion on such infrastructure from this year to 2021. What water infrastructure? Presumably the NEWater and desalination plants that are in the pipeline.

ST reported that besides the cost of producing water, it’s also getting more difficult to distribute water. PUB, for instance, can no longer just dig trenches to lay water pipes underground because the country is so built-up. It has to use pipe-jacking, a more expensive method which involves assembling pipes into shafts and then pushing them into position with a hydraulic jack.

In our heart of hearts, we probably know that it’s time for a rise in water prices, especially since it was last raised 17 years ago. The question is why now and why this much? Minister of State for Finance Lawrence Wong said there is never a good time for water price rises, which is true.

But a hiatus of 17 years?

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CIMB economist Song Seng Wun said at a forum yesterday that the fact that “we are finally charging a bit more for water after 17 years reflects that somebody forgot it hasn’t been done yet”.

Going by what experts say, the 30 per cent rise isn’t good enough. It should be way higher, like doubled. Say this to the people though. At forums on the Budget statement yesterday, the water price was a key issue, which is probably to the G’s chagrin since it wants to bill the Budget as a tool to shift the economy into high gear.

Although the argument is about water security (read: what if we get no more water from up north?), the price rise is also to add to the G’s coffers, which is increasingly under strain.

Now before you get your hackles up because the G is “rich”, consider what the experts have to say about the Budget.

Maybank Kim Eng economist Chua Hak Bin was reported in ST as noting that despite projecting a small overall fiscal surplus of $1.91 billion for the 2017 financial year, the G is looking at a primary deficit of $5.62 billion, worse than it was during the 2009 financial crisis.

A primary fiscal deficit does not take into account investment contributions from GIC or Temasek Holdings, and broadly implies that tax revenues are not keeping up with government spending.

He might as well add we can always tweak the formula on investment contributions, but that would be cheating, won’t it?

Economists are asking for more transparency in accounting and even the setting up of an independent agency to look at the effectiveness of G spending.

They have a point: We’ve seen so many announcements about millions and even billions on this or that G scheme over the years but what have they resulted in so far?

Finance Minister Heng Swee Keat made no bones about the need to raise revenues, especially since he has ordered G agencies to trim their budgets. So far, he has only talked about making non-GST registered companies which do cross-border businesses here pay the tax. That means the likes of Taobao and Amazon and e-retailers.

But if the G wants to persuade people to part with more money, it has to do better at telling people what things cost. It can start with this: What in heaven’s name is “long-run marginal cost of water supply”, the formula which underpins water prices?

 

Featured image from TMG file.

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