Penang Chief Minister Lim Guan Eng should be "honest" by admitting the state's debt reduction was made possible by a large portion of its debt being transferred to the federal government.

"Don't lie to the people as though you are smart and able to reduce the debt.

"He (Lim) has to give an overall and correct picture to the people, don't hide," said Gerakan secretary-general Liang Teck Meng in Putrajaya today.

Liang, who is also National Water Service Commission (Span) chairperson, was referring to the 2011 water restructuring agreement, where Putrajaya agreed to convert the state's existing RM655.24 million in debts to 45 annual lease payments of RM14.56 million.

The Auditor-General's report 2016 Series 1, which was tabled earlier this week in Parliament, stated that two opposition states - Penang and Selangor - have the least arrears owed to the federal government.

It was reported that Selangor had RM14.67 million in arrears, while Penang had none.

Umno minister Abdul Rahman Dahlan had urged Lim to cancel the water restructuring deal with Putrajaya if he "continues to claim credit" for the state's debt reduction.

Concurring, Liang said Lim should cancel the water restructuring if he continued with such "lies".

"If he is that good, then cancel it," he challenged.

In a statement yesterday, Lim said Penang's debt reduction and zero debt arrear could not be emulated by the federal government, whose debt increased from RM501.6 billion in 2012 to RM648.5 billion in 2016.

"In contrast over the same period, Penang reduced its state debts by 90 percent to RM65mil by end 2016, the lowest amongst all states in the country," he said.

"Is Abdul Rahman green with envy because of Penang’s success? He should not behave childishly and throw a tantrum to ask us to cancel the water restructuring deal," he said. 

He stressed that the water debts were incurred by the previous BN state government and "it is only fair to return those water debts to the BN federal government".

"The debts taken over by the federal government was not for free, but in exchange for water assets surrendered by PBAPP, and now owned by the federal government," he said.

"The water restructuring deal, taking over of water debts and surrender of assets was not peculiar to Penang but also applied to all other states," he added.

"Will the federal government then cancel all the water restructuring deals for all states; return the water assets back to the states?" 

He also asked if Putrajaya would push through a constitutional amendment to undo its previous amendment in 2005, to return the relevant power to the states.

On another development, Liang today said Span has not decided on the proposed hike in sewerage fees.

"(The sewerage service) is the concession (agreement signed) between Indah Water Konsortium (IWK) and the Finance Ministry. For now, no discussion as to whether there will be a hike," he said.

Liang was quoted as saying by Sin Chew Daily in January that sewerage fees had not been increased since 1997, thus there would be a hike.

He said the hike was needed as IWK only managed to collect 50 percent of outstanding sewerage bills that have accumulated since 1997.

Last week, IWK said it managed to recover 87 percent of the total RM8 billion outstanding accumulated bills.