Here's how the government justified the 30% water price hike

It is to reflect water's true scarcity value.

The Singapore government, as announced by Finance Minister Heng Swee Keat during Budget 2017, will raise water prices by 30% in two phases

The hike will commence from July 1, 2017, with ain increase of less than $25 per month for three-quarters of businesses once the increase is fully phased in on July 1, 2018.

During the Budget 2017 debate, Minister for the Environment and Water Resources Masagos Zulkifli explained that the reason behind the decision is to reflect the water’s true scarcity value.

The hike is to boost investment in desalination and NEWater plants to ensure resilience in supply.

"Firstly, the Long Run Marginal Cost (LRMC) is a mix of NEWater and desalination costs. Now, in the blend between NEWater and desalination, we have to depend more on desalination for the next litre as water demand increases. There is also a limit to recycling used water in our NEWater plants. Therefore, to increase our water supply further, we must build more desalination plants. In fact, we are building three desalination plants within the next three years," the minister said, adding that as Singapore becomes more urbanised, the government is shouldering more costs to build new and replacement pipes to deliver water.

"Looking at the first year price of desalination for instance, while the first-year price for our first plant, Singspring desalination plant, was $0.78/m3 (2005), the first-year price of our latest plant at Marina East was $1.08/m3, some 40% increase. For conveyance costs, we now tunnel below the road to lay pipelines. This minimises inconvenience to road users and the public, but it costs two and a half times as much as conventional pipe-laying techniques. Also as our pipelines age, PUB will have to more than double the rate of renewal for old pipelines from the current 20km per year to 50km per year, to minimise pipe leaks and disruptions," Mr Zulkifli noted.

He said all these point to the need to update the LRMC, which the 30% price increase has reflected.

"We are unable to provide details of its computation because of commercial sensitivities. We still need to build more desalination plants and NEWater plants. As more desalination, NEWater and water reclamation plants are yet to be built or expanded, revealing the specifics of the LRMC could prejudice future bids. But rest assured that the LRMC reflects the best the market can offer," he added.

With this, the minister argued that overall water will still be affordable for both businesses and households, given that 75% of businesses will see an increase of less than $25 per month in water bills while 1- and 2-room HDB households will not experience any increase on average.

"Indeed, I am heartened that some businesses have taken this increase in context and have explicitly said that they would not increase prices. For households, the Government has provided additional U-Save rebates," he said. 

Photo grabbed from PUB