How Will The 30% Water Hike Be Passed On To Consumers?

One of the key talking points arising from this year’s budget announcement is the 30% water hike that would be felt in the years to come once introduced in Singapore.

It has been argued at length that the 30% hike will not be a major impact for the majority of households in Singapore, since water price are not that high to begin with. That said, we cannot ignore the impact that this price hike would have on businesses, since water is one of the everyday commodities that everyone uses. An impact on businesses would eventually trickle down (no pun intended) to us, the consumers.

Impacts On Businesses:

While some industries would be more affected than others, it is safe to say that these industries would be impacted the most.

• Food and Beverage
• Maintenance fees in condominiums
• Car washing

Food and Beverage:

Water obviously makes up a relatively big proportion in the F&B industry with it being a necessity for hygiene purposes and an essential component in the making of food and drinks.

There have been a couple of reports that the price of your daily cuppa at the kopitiam would be unlikely to increase due to this hike. Such report however unfairly downplay the importance of water for the daily operations of food centres. Water is required by these F&B outlets on a lot beyond just making your daily cup of kopi.

According to Singstat (Table 1), from 2013 to 2015, utilities cost as a proportion of total operational costs in the F&B sector has decreased from 3.93% to 3.12%. While this is an average figure, it also means that if there is a price hike in food items in the near future, it may not necessarily be due to the water price hike because there are many other factors that could contribute to the rise.

The bottemline here is that while water is indeed a significant cost components for F&B outlets, there are also many other factors that would lead to a price increase of food and drinks.

Table 1: Details Of Operating Expenditure for Food and Beverage Services

Source: Singapore Department of Statistics

Read Also: 3 Reasons Why Evian Water Is So Expensive

Maintenance fees in condominiums:

Condominiums with amenities that requires a large usage of water such as fountains and swimming pools may need to increase their own maintenance fees in the future. This can be interpreted from the statistics table below which is extracted from Singstat.

According to statistics from Singstat (illustrated in Table 2), the average monthly household expenditure for water has in fact declined from 2007/08 to 2012/13 while other components such as housing maintenance fees and miscellaneous services have gone up substantially, contributing to the total increase in utilities by 13.3% in approximately 5 years.

This suggests that other factors would contribute to the rise in maintenance fees in condominiums as opposed to just the water hike.

Table 2: Average Monthly Household Expenditure in Condominiums by Type of Goods.

Source: Singstat. Report on the Household Expenditure Survey 2007/08 &   2012/13.

However, depending on the percentage of total maintenance costs that the water bill consist of, which is roughly 10-15% of operating costs, the increase in the cost of water could very well be a contributing factor in the future.

Read also: Singapore Budget 2017: Early Analysis On The 7 Things That Matters To You

Carwash:

According to a local car wash owner located at the Ubi industrial area, it would not be feasible to pass on the 30% water hike on to customers in the form of higher prices charged for car washes. “I would lose more of my customers,” he commented.

He further elaborated that currently his water bill consists of approximately 28% of his operating costs but with the inevitable rise in his water bill, this would increase to about 37%. A painting shop that he also owns racks up a relatively high water bill that comprises 25% of total operating costs and is expected to rise to 32.5%.

While profit is expected to go down marginally on a monthly basis, the accumulated cost would be felt annually. With such an impact on the business, consumers should expect car washing shops to eventually pass on the rise in water costs when these businesses are no longer able absorb the higher costs.

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