Scaling Water Conservation Tax to Allow for Minimum Hygiene Standards

Mr Leon Perera asked the Minister for the Environment and Water Resources whether the Ministry will consider scaling the application of the water conservation tax (WCT) for households such that there is no WCT imposed on a quantity of household water consumption deemed necessary for minimum hygiene standards.

The total water price comprises the water tariff, used water charges and the Water Conservation Tax (WCT). Currently, both the water tariff and the WCT are tiered. While households that consume less than 40 cubic metres (m3) of water pay a water tariff of $1.17/m3, and a WCT at 30% of the water tariff, households that consume more than 40m3 of water per month pay a higher tariff and a higher WCT, at 45% of tariff. The differentiated tariff and WCT serve to discourage excessive water consumption. Mr Perera’s suggestion would mean further differentiating WCT such that consumption within a certain volume below the first consumption tier will not attract the WCT.

We have imposed WCT on overall water consumed because of the principle that water conservation should apply to all households from the first drop. Whether water is used for basic or discretionary purposes, there is a need to ensure prudence and avoid wastage. Hence, the WCT is levied as a percentage of water tariff to reinforce the message that water is precious from the very first drop.

This is consistent with our water pricing principle and approach, which is to price water to reflect its Long Run Marginal Cost. The WCT, together with the water tariff and used water charges, seek to price water such that it reflects the cost of producing the next drop of potable water, which is likely to be more from desalination and NEWater. This ensures that water demand, for whatever purposes, takes into account the scarcity value of water.

Nonetheless, we appreciate Mr Perera's intent in ensuring that water remains affordable for household needs. For this, the Government provides appropriate cash grants to all Housing and Development Board households through the Utilities-Save scheme to help defray their utilities expenses.

This approach allows the Government to right-price water to encourage prudent use of water, while at the same time ensure affordability of utilities to lower income households.