But even with the impending 30 per cent hike in water prices, the price of water in Singapore will still be lower than the long run marginal cost – which is the increase in cost over the long run from increasing production, said Mr Masagos who was speaking in Parliament during the debate on the Budget statement.
Speaking a day after parliamentarians, including Workers’ Party MPs, had questioned the timing and need for the price hikes, Mr Masagos noted that water is unlike any other ordinary commodity in Singapore. “Water is a strategic issue. It is a national security (issue). We must price water fully… The consumer must feel the full price of water. The consumer must realise how valuable water is to us in Singapore every time he or she turns on the tap, right from the first drop,” said the minister.
He added: “This is the best way to emphasise the scarcity value of water.”
Mr Masagos also outlined how the costs of water have gradually gone up over the years, but said that details of how the long run marginal cost was computed cannot be revealed. Revealing these specifics could prejudice future bids for desalination, NEWater and water reclamation plants that have yet to be built or expanded, he explained.
The long run marginal cost of water comes from the costs of NEWater and desalination. Between the two, Singapore will have to depend more on desalination to meet increasing water demands, as there is a limit to recycling used water in the NEWater plants.
Therefore, more desalination plants will have to be built. Treated water from Singapore’s latest desalination plant at Marina plant costs S$1.08 per cubic metre for the first year, which is 40 per cent more than the corresponding price at Singapore’s first desalination plant Singspring in its first year.
Meanwhile, as the proportion of water being reclaimed for NEWater increases, effluent or waste water becomes more concentrated, making it difficult and costly to treat.
Further, it also costs more to build new and replace pipes to deliver water given Singapore’s rate of urbanisation, noted Mr Masagos. It costs two and a half times more for instance, to tunnel below the road to lay pipelines as compared to the conventional method of laying pipes.
The minister also stressed that for three quarters of the businesses here, the 30 per cent increase in water prices translate to an increase of less than S$25 a month in water bills. With the additional U-Save rebates, one- and two-room HDB households will also not experience any increase in their bills, while other HDB households will see water bills go up by between S$2 to S$11 a month.
Overall, water will still be affordable because it will remain at about 1 per cent of the household income, he added.
During the debate on Wednesday, MP Seah Kian Peng (Marine Parade GRC) spoke against detractors who “lost no time in politicising” the issue and sought to address the “myths” that have emerged. The accusation that the Government is “making money off water” cannot be further from the truth, he said, citing 2012 figures showing that the authorities subsidised at least 30 per cent of water in Singapore, in simple terms.
Mr Seah also argued against the view that raising water prices will hit the poor heavily. Raising the price of water to reflect its true cost is a “fairer system” and that the Government has introduced measures such that the burden on the poorest is reduced.
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"Your childhood was always great wasn't it?" - Michael Carrick
Consumers must feel the full price of water to realise its value!
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