Right water pricing crucial to Singapore's survival

Singapore

WATER sufficiency is vital to Singapore's existence and survival, thus the need to price it correctly, ministers said as they addressed concerns raised by MPs over water price hike during the second day of Budget 2017 debate.

Minister in Prime Minister's Office Chan Chun Sing and Minister for the Environment and Water Resources Masagos Zulkifli explained the rationale behind the decision to raise water prices, even as they feel the angst of the people.

As announced by Finance Minister Heng Swee Keat when he delivered Budget 2017 last week, water prices will rise by 30 per cent in two phases from July 1, 2017, with a hike of less than S$25 per month for three-quarters of businesses once the increase is fully phased in on July 1, 2018.

Mr Heng had said then that imported water and local water catchment currently meet more than half of the nation's water demand, but both are weather-dependent.

Thus, the investment in desalination and NEWater plants are necessary to ensure resilience in supply, despite them being costly.

Mr Masagos said yesterday: "It is the job of my ministry and PUB to plan and build the infrastructure, which we will do, but it is only through right pricing that we can have everyone valuing water as a strategic resource and consciously conserving it."

Mr Chan reiterated that Singapore is still nowhere near where it wants to be, although there are 17 reservoirs now compared to three in the past, and that two-thirds of the land here is a water catchment area.

As the cost of producing clean water spirals up, demand for water has been rising as well, as Singapore remains a water-stressed nation.

"The consumer must feel the price of water, realise how valuable water is in Singapore, every time he or she turns on the tap, right from the first drop," said Mr Masagos.

Singapore is among top countries with the greatest risk of high water stress in 2040, according to the World Resources Institute, said Mr Masagos.

Thus, water is a strategic issue and a matter of national security, he added, as he revisited the time when the government revised water prices in 1997. "Elements in Malaysia were threatening to block our supply of water from Johor. We were embarking on desalination to secure our water supply. We needed to register with Singaporeans the strategic importance of water and the importance of saving every drop possible."

So the government decided to revise the water price substantially to reflect water's true scarcity value.

Mr Masagos said: "If we needed any additional water, where would it come from? How much would that additional litre cost? That is what we call the Long Run Marginal Cost (LRMC). That is the cost which consumers must see."

The only proven technology then was to produce drinking water through desalination, which was very expensive, at S$3 to S$3.50 per cubic metre, excluding the cost of pipelines, through the multi-stage flash distillation.

"There was no way for the government then to move the water price to the true cost of the next litre - the price of desalination - so it was moved instead in steps, over the period of 1997 to 2000, to today's water price," said Mr Masagos.

Since then, water technology has progressed, with the development of cheaper NEWater relative to desalination and improved membranes-based desalination, which keep water cost down and hold water prices unchanged for 17 years.

But costs have risen gradually over the years, where a price revision becomes essential at a certain point, said Mr Masagos.

While NEWater is cheaper to produce, there is a limit to recycling used water in NEWater plants, he added.

As the proportion of used water being reclaimed for NEWater increases, effluent becomes more concentrated, hence more difficult and costly to process.

Therefore there is more dependency on desalination for the next litre of water as demand for water rises.

Building new and replacement pipes to deliver water is also becoming more costly as Singapore becomes more urbanised, he noted.

In response to Workers' Party MP Pritam Singh (Aljunied GRC), Mr Masagos said technology has been priced into the computation of LRMC.

He said: "Technologically, we have squeezed everything we 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."

Mr Masagos said that the government is building three desalination plants within the next three years, while noting the serious depletion of Linggiu Reservoir in Johor in recent years.

"What is clear is that Linggiu is operating today at a level way below what we are comfortable with, and it will take years to build up again to a reliable capacity," he said.

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