Prime Minister Dr Mahathir Mohamad told Singapore on Tuesday that it did not need to wait until 2011 to terminate one of two water purchase pacts.

In the latest tit-for-tat exchange on the issue, the premier said Malaysia was merely doing its neighbour a favour by supplying it with water under accords signed in 1927.

"They want to remove, it's alright. It can stop even now, no need to wait until 2011," Mahathir told reporters in response to reports that Singapore wants to let one of the agreements lapse.

"We do not want to sell water to them. We are losing money selling to them. We do not depend on them as sources of income to finance the government. We are doing them a favour."

The affluent but resource-starved Singapore relies on Malaysia for half its daily water needs but recently moved to recycle waste water to cut the dependence amid a deadlock over the price of Malaysian water.

The city-state has now declared it would be able to let one of the pacts lapse in 2011, after the two sides last month failed to agree on a water pricing formula. A second accord expires in 2061.

Domestic Trade and Consumer Affairs Minister Muhyiddin Yasin, who is currently visiting Singapore, reportedly confirmed that Singapore did not intend to renew the water pact when it expired in 2011.

He was quoted by Tuesday's The Star as saying that he was informed of the decision by Singaporean Prime Minister Goh Chok Tong during a courtesy call on Goh who however, wanted negotiations on water price to proceed.

Other unresolved issues

Mahathir said Malaysia sold raw water to Singapore at three sen for 1,000 gallons but Singapore made a profit by selling the same amount of treated water back to Malaysia at one Singapore dollar (RM2.10).

"We promise to supply them with water but not for them to sell at a profit. It's to give water sufficient for the use of Singaporeans," he said.

Water has been a key irritant in bilateral relations since Singapore was kicked out of the Malaysian Federation in 1965.

Singapore will host a second round of talks Sept 2-3 on the water issue and other unresolved issues including a proposed new bridge link, use of Malaysian airspace by Singaporean aircraft and the location of Malaysia's customs, immigration and quarantine facilities in Singapore. AFP