INCREASE OF WATER CHARGES (Statement by the Minister for Finance)

3.00 p.m.

Dr Goh Keng Swee: Mr Speaker, Sir, complementary with the construction of low-cost houses by the Housing and Development Board has been the expansion of modern sanitation facilities throughout the Republic. In 1960, 36 per cent of the population was served by modern sanitation. The percentage now is 55 per cent. Some $69 million have been spent over the last nine years in extending sewerage facilities not only to new industrial and housing estates but also to outlying areas which hitherto had not been provided with such facilities.

It is the Government's intention to make modern sanitation available to every home within economic reach. We will spend approximately $60 million for the period 1968-73. To help finance the scheme, the World Bank has agreed to a loan of $18 million to meet the foreign exchange component of the sewerage projects, the first time the World Bank has given a loan for sewerage development anywhere in the world.

Up to now, the capital and operational costs of the Sewerage Department have not been covered by the revenue collected. To be quite candid, no one knew what returns we got on expenditure as the sums had never been worked out. In the course of negotiations with the World Bank for the loan, the Bank made it clear that approval of the loan was conditional on the sewage fees being revised. Further, fees were to be linked to the volume of water consumed and the revenue by 1972 was to be adequate to cover operating expenses plus interest on capital amortisation. It is a cardinal principle with the World Bank that investments must pay their way.

In compliance with the conditions set out by the World Bank, it is necessary to raise the charges for water. The increases will be as follows:

(i) Domestic users of water will pay an additional 20 cents per thousand gallons of metered water in addition to a fee of $2 per fitting per month;

(ii) In the case of non-domestic premises, the charge will be 50 cents per thousand gallons of metered water;

(iii) In the case of industries utilising water in their end-products, meters will be fixed to assess the amount of water used for industrial purposes and not discharged into sewers.

These fees will be collected by the Public Utilities Board on behalf of the Government. The additional payments from domestic premises will vary between 20 cents and $1 per month for more than 55 per cent of the population, while another 30 per cent will pay between $1 and $2 per month. Commercial and industrial premises will also bear a share of the costs, varying from $2.50 to $15 per month in the case of coffee-shops, and $15 to $75 per month for the smaller industrial premises.

In order that the increases in utility charges will not be reflected in poorer households, the current exemption from the P.U.B. sales tax on consumers whose bills are below $10 a month will be extended to those whose bills are below $12 a month. The five per cent tax payable on bills between $11 and $20 will now be applicable to bills between $12 and $25 a month and the ten per cent rate of tax will in future apply only to bills over $25. In spite of the increases, the return of investments in sewerage is expected to be no more than two per cent on capital invested.

Legislation to give effect to these increased charges will be introduced at this sitting of Parliament, and when the Bill is passed early next year the increases will take effect.

Mr Ng Kah Ting (Punggol): Mr Speaker, Sir, I think this is a Christmas present for the thousands of consumers. I have two questions, Sir. First, what is the number of consumers who are making use of the sewage schemes? Secondly, the Minister for Finance mentioned that the revenue returns would be only two per cent. In other words, it is only $1.2 million. Will there be further increases later on when the Minister will probably come here with another Ministerial statement?

Dr Goh Keng Swee: Sir, the Member has not been listening with the attention that the statement deserves. As I said in my closing remarks, these increases will take effect next year and therefore he and his friends can spend their Christmas without undue concern that the water bills are going up.

As regards the two per cent return, I do not know how the Member arrived at the figure of a yield of $1.2 million. When I said a two per cent return on capital, I meant a two per cent return on the capital that had been spent in all sewerage works in the past. The Member will agree that this is a very low return on capital investment. For instance, if you were to invest money in business, you would expect a return of at least 20 per cent; but this being a public utility, Government had to settle for a very low rate of return indeed. Of course, I agree with the Member that this is most unfortunate, but let us reflect on the good fortune in the past when these people were getting subsidised services. In the past, as I have said, there was no accounting on this score, and what happened was that the general tax revenue had gone into meeting the losses sustained by running the sewerage system. With these new charges, the Sewerage Department should at least no longer be in the red.

Whether there would be further increases or not, no one can say. It all depends on a number of things which it is not possible to predict now. For instance, if wages and costs go up, then naturally the charges will also have to go up.

Mr Ng Kah Ting: Mr Speaker, Sir, the figure of $1.2 million was arrived at as a result of the $60 million loan, apart from the other capital investment involved. Just now the Finance Minister mentioned that the Sewerage Department had been running at a loss. I would be grateful if he could inform the House of the amount of losses up to date.

Dr Goh Keng Swee: Mr Speaker, Sir, as I said in my statement, no one knew what the losses were because no one did the sums. But the Member for Punggol will recollect that the Sewerage Department was at one time a department of the former City Council. When the City Council hived off into different departments with the main utilities department forming the Public Utilities Board, the treasurer then knew what the position was and passed on the Sewerage Department to the Government. He was under no illusion that this was a losing proposition. So Government had to carry this baby, and this was carried, as I said, out of the general tax revenue until we applied for the World Bank loan. The World Bank did the calculations and said that this loss has now got to be made good.

Mr Ho See Beng: Sir, is it correct to say that it is a loss because it is a service to the public and not a trade?

Dr Goh Keng Swee: Yes, it is a loss in the sense that those receiving the services did not pay for the cost. It is like people riding on the Singapore Traction Company's buses and the company is losing money - in the same way that the Sewerage Department is losing money.

Mr Lim Cheng Lock (Kampong Kapor): Mr Speaker, Sir, may I ask the Finance Minister this: if the Sewerage Department is losing money, would it not be more equitable to raise the sewage fee rather than the rate of water consumed, because the people who do not now enjoy the use of the sewage system will be asked to pay for something which they are not receiving?

Dr Goh Keng Swee: That is one way of charging people, in proportion to the user of the facilities. It is quite a technical subject and this matter has been gone into in great detail by officials of my Ministry and the Public Works Department. The calculations were checked by a mission sent by the World Bank, and they came to the conclusion that a combination of fees per fitting plus the consumption of water is the best and most equitable method of charging for this service.

Mr Ng Kah Ting: Mr Speaker, Sir, the Finance Minister mentioned that a loan of $60 million will be coming from the World Bank to enable us to extend our sewage facilities in the next five years. Can he inform the House whether the entire Republic will have such facilities, bearing in mind, of course, the increase in water rates?

Dr Goh Keng Swee: The sum of $60 million is the total expenditure from 1968 to 1973. The World Bank will finance only a part of this expenditure, that is, the foreign exchange component, the money used on imported material, and this comes to only a proportion of this amount.

Whether the whole population will receive this facility by 1973 I doubt it.

Mr Ng Kah Ting: Mr Speaker, Sir, will the Finance Minister not agree that to charge the increase in water rates to those who lack such sewage facilities is unfair?

Mr Speaker: Order. Are you repeating Mr Lim Cheng Lock's question in different terms?

Mr Ng Kah Ting: It is somewhat different from the question asked by the Member for Kampong Kapor. The Member's question was about the increase of sewage fee. My question is: will the increase not be unfair to those consumers who make use of water only?

Dr Goh Keng Swee: I do not follow the Member's question.

Mr Ng Kah Ting: The Minister has already informed the House that water rates will be increased after the New Year. Whether it be a Christmas present or a New Year present makes no difference. My question is this: will he not consider it unfair to those consumers who lack the sewage facilities and yet have to pay more for the water consumed?

Dr Goh Keng Swee: Mr Speaker, Sir, I suppose in a sense it is unfair. But, on the other hand, let us not forget that these are homes in rather remote areas, and possibly if we were to apply the principle of charging every one the cost of the services, it may well be that houses in such remote areas would have to pay more for their water anyway because it is more costly to lay the mains to these areas. In these matters, of course, one tries to apply a rough and ready rule whereby everybody makes his contribution to the services.

Mr Ng Kah Ting: Sir, if it is a case of rates which the Finance Minister mentioned just now in respect of no tax on consumers whose bills are now below $10 a month, will he then increase them to, say, $15 and $30 instead of coming to a happy compromise at $12 and $25?

Dr Goh Keng Swee: Yes, this is exactly what has happened. The exemption rates have been raised so that this additional charge will not bring in new consumers to pay the sales tax. In fact, there will be a reduction in the tax on Public Utilities Board bills. So the limits which have been proposed are more than generous.

Mr Ho See Beng: Sir, in view of the Minister's statement that there is a possibility that the cost of water will be increased, has Government explored the possibility of installing machinery to desalt sea water?

Mr Speaker: Desalination is far from sewerage. Mr Ho, I do not see how your question can arise out of the Ministerial statement.

Mr Ho See Beng: Sir, I think the Minister did say that there is a possibility that the cost of water would have to be increased. So if we could introduce desalination, water might be cheap.

Dr Goh Keng Swee: Sir, I only mentioned the possibility of further increases in charges because I was asked to commit myself to the position that there would never be any increases in charges. Of course, I cannot give any undertaking of that kind. I have also linked the possibility of increases in water charges with the possibility of increases in wages. So if the Member applies himself diligently in the trade union field to the task of maintaining wage stability, then he will ensure that there will be less chances of increases in water charges.

Mr Lim Cheng Lock: Sir, for several years I have been a member of the Public Accounts Committee which drew attention to the appalling state of affairs in the financial administration of the Sewerage Department. Can we have the assurance of the Finance Minister and also of the Minister for National Development that they will seriously look into the financial administration of the Sewerage Department and will take corrective measures on the financial side of the department?

Dr Goh Keng Swee: Yes, Sir.

Mr Low Yong Nguan (Crawford): Mr Speaker, Sir, before the whole project of sewerage development is undertaken, has the Ministry ever explored the possibility of allowing it to be handled by private enterprise? It might be more economical.

Dr Goh Keng Swee: Sir, that novel proposition has never entered my head.