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STANDING COMMITTEE ON ENVIRONMENT AND HERITAGE
(House of Representatives-Wednesday, 18 April 2007)
CHAIR (Dr Washer)
KAROL, Dr Elizabeth
- CHAIR (Dr Washer)
Content WindowSTANDING COMMITTEE ON ENVIRONMENT AND HERITAGE - 18/04/2007 - Sustainability charter
CHAIR —I call the representatives from the Water Corporation. Although the committee does not require you to give evidence under oath, I should advise you that these hearings are formal proceedings of the parliament and consequently they warrant the same respect as proceedings of the House itself. It is customary to remind witnesses that giving false or misleading evidence is a serious matter and may be regarded as contempt of parliament. Would you like to make some opening remarks? Before you do; on the record, your corporation yesterday was fabulous to us, and thank you.
Dr Humphries —We are happy to have been of help. I will lead off, Mr Chairman. You are probably familiar with the Water Corporation but it is basically a corporatised state utility and delivers most of the commercial and domestic water services for Western Australia. There are a couple of minor exceptions to that. We have the challenge of an enormous operating area, a third of the continent, and the business has a very large influence on the wellbeing of people, the state’s economy and obviously the natural environment; because our infrastructure occupies it, we take water from it and we return wastes to it as part of the business.
The Water Corporation takes sustainability—the logic and the application of sustainability—extremely seriously in the business. We have been actively thinking and behaving in that space since about 2001. Probably the leading driver for that was the effectively very serious decline in the environmental availability of water in south-western Australia. I have a document here which is really a work in progress which I am happy to table. I am talking to it quickly. Basically just to show you, I think you have all seen the famous graph, but that caused very serious reconsideration of the way we did business in terms of supplies as well as the effects of our activities on the environment and the ability, in contrary terms, of the environment to actually support the business. To be slightly colloquial, it sort of focused the corporate mind.
In addition to that, as a primary driver we had a lot of other challenges simultaneously. There was finite financial and other capacity and we are in the context of a still declining natural environment, which I think all state of the environment reporting nationally is showing: increasing community concern; more regulatory complexity in actually getting projects approved; major industry reforms on the water sector, which have changed the way we have done business; much increased demands on employees because there was a very strong capital project response to those difficulties; and, right now, with the current boom in Western Australia, difficulties in recruiting and retaining staff. So all of those conjoined to really have us consider whether or not pursuing business as usual was a viable proposition. Our executive and board really concluded that it was not.
Our response has been to set up a structured sustainability strategy which is in place but as an adaptive document and approach. It deals with all aspects of the business, although to be completely honest we are not fully there yet but I guess everywhere from finance to human resources to infrastructure to operations are under the microscope and being progressively reformed. A brief description of where the Water Corporation has got to was delivered to the Auswater conference in March in Sydney. I will table two papers: one by my colleague Paul Ferguson; and one by me and other colleagues. That gives more detail than we have time for this afternoon.
A key thing that’s very important is to define what is meant by sustainability. There is a lot of very vague talk about it and in our view the concept is fundamentally simple. It is complicated to address but simple in concept—that is that the biosphere contains human society as a subset of it, which in turn contains the economy. So economic stability and a civil society, with people being healthy and happy, simply cannot be maintained if we effectively chew up the natural capital of the environment. That is the key concept underpinning our sustainability approach.
Clearly, it really involves paying the environmental debt of our activities but finding socially and financially viable ways to do that. We clearly cannot bankrupt the business. At a global scale, I do not need to emphasise the point that we are overdoing it as a species and global warming is a strong manifestation, but there are lots of other elements of dysfunction. So the business response to that—or the community and business response really—needs to be a systematic dissection of what those problems are and, effectively, a compensatory or restorative action.
Our view of sustainability really is the bullseye model that Porritt has published, and that is in this paper. In relation to the terms of reference of this committee, we strongly support a sustainability charter for the country. However, we do offer some suggestions in terms of the logic and approach that might be used. Firstly, at a higher level, the charter needs to have an agreed concept of sustainability that everybody can sign up to; and a statement about what we want to sustain, for whom and for how long, because the whole concept of sustainability is very context-dependent. By that I mean that, say we are talking about sustainable irrigation—the debate that is happening about the Murray-Darling Basin at present—if the environment fails to supply the water, no amount of improvement of irrigation efficiency will give us a sustainable irrigation business, and the same is true of urban water. Obviously there are other bigger issues like that.
Relating to those two points, the key themes for targeting then need to logically map back to the things that are important to sustain. They will obviously be around achieving stability and viability of key ecosystem processes, supporting the legitimate social and physical needs of people that support a civil society and, obviously, having a healthy economy which does not operate at the expense of the other two. We also suggest that a strong dialogue to come up with strategic visions aligning with the sustainability targets is an important part of the dialogue that we need to have nationally. Canada is doing that better than Australia at present. Dr David Suzuki has an environmental compact with a 30-year vision for air quality and human health and all sorts of other things which even businesses who may be acting in an adverse way are quite happy to sign up to because I guess the future state is sufficiently in the future for them not to be frightened by it. But unless we clearly articulate what we want Australia to be like in 10, 20, 30, 50 years time, we are going to confound the argument at least and probably just shamble around on it.
The other key point is that the governance structures and processes to deliver the targets really have to be very rigorous. I think we have learnt some big lessons from the decade of landcare where the Commonwealth Auditor-General reported, if my memory serves me correctly, that for the investment of over $380 million we had got enhanced community awareness, which is a pretty high price to pay for simply making people more aware. We really need to be very targeted in terms of ensuring that we are driving delivery of improvement in all of the things that we choose to improve.
I have made the point that the elements of a vision of a sustainable Australia need to be broadly agreed and accepted by the majority of people, governments and business. We suggest that perhaps some form of a compact or social contract may be a useful mechanism to support this or perhaps a COAG agreement. There are a variety of mechanisms which I will not go into but I am sure that the committee understands them better than us.
Lastly, agreeing on and then pursuing, monitoring and publicly reporting progress against goal in the key target areas is essential; we would suggest, in a highly public and regular way, a bit like stock market reports and financial reports. If we are serious about this, the normal government reporting processes will not work because 98 per cent of the population never read them.
Ms GEORGE —I cannot blame them.
Dr Humphries —No, that is true, deputy chair. But I think some innovation in that area would be important. Briefly, some suggestions for key target areas—and this is far from complete and we would be happy to come back formally to the committee with a more fulsome submission than these few pages of notes—and useful areas for consideration we would say are ecological footprint in the sense that it is a synthetic measure of whether or not we are increasing or reducing their overall impact on the physical environment. The water industry in Australia is considering a customised version of that. It has not been agreed yet. As a major component of ecological footprint, greenhouse gas emissions in the net sense are very important.
Water balance: we are already doing that to a degree through the national water audit under the Australian Bureau of Statistics. Measures of the health of biodiversity are obviously also important, and probably some measures of landscape integrity and connectivity, particularly for southern Australia where we have really fragmented the landscape and caused the related problems of salinity and rising watertables; also, some measures of social and societal wellbeing. We are not going into any detail but there are a couple around. One is the genuine progress indicator of The Australia Institute—I think Clive Hamilton was the author of that—and there is an emerging measure called social footprint which is an analogy of ecological footprint, and I will provide full references to those, too. That is all I would like to say, thank you.
CHAIR —Thank you.
Ms GEORGE —Thank you very much for your constructive input into the challenges that we face. I must say that, on the ground, the examples that we saw yesterday of the desal and reuse of water, the trial that you are going to do in terms of recharging the aquifer, has kind of left me feeling that it is a state government instrumentality that seems to know where it is heading.
Dr Humphries —We are probably less confused than we were.
CHAIR —You did a good presentation.
Ms GEORGE —Yes. One thing that did intrigue me, before getting onto some of the things that you have mentioned today, in terms of sustainability, you are blessed by having the capacity for the aquifer solution to your water problem. But it seems, from what I was picking up yesterday, that we do not really have any measurement to what extent the bores that are being sunk in backyards are impacting on that available water supply into the future, particularly with declining rainfall and the problems with that. Are you giving any thought to better monitoring of the bores and maybe putting limits on what households can use? Everywhere we went in these brand-new developments, it was nice to see very green grass but it is probably coming at a high price. I just thought there was a bit of a missing link in the sustainability project in terms of accessing bore water.
Mr Ferguson —Maybe a bit of clarification of what we do versus what other people do in the state. We are a utility and responsible for providing water services. The management of water resources actually rests with the Department of Water which is separated from us. They regulate the use of water resources across the state and we are responsible for providing those water services within all the constraints that operate.
Ms GEORGE —So I am asking the question of the wrong body.
Mr Ferguson —It is a relevant question. From the point of view of Perth being a little bit different than other places in terms of rainfall and climate, if the use of those bores was restricted in some way, that is going to fall back onto us as a utility service provider to pick up the difference. It is quite likely that people are using more water from their local garden bore than they would out of the scheme, notwithstanding they have invested capital in putting it in in the first place. So that would probably push the demand down. It would have a significant impact on us in terms of the demands placed on our scheme to deliver water to the general population.
Ms GEORGE —So you would be making up the balance.
Mr Ferguson —We would be making up the difference, basically, yes, and it would have to come from somewhere. The difference would be that the water quality that is often used in developed areas is from the superficial aquifer and close to the surface; it does not have any sort of localised environmental impact. Clearly, in the broader sense, if it is lowering watertables, then there are quite considerable impacts. But I guess the real people to direct that question to are the Department of Water.
Dr Humphries —We would say, though, that there is a case for better regulation of those bores and also probably better integration with private wells into public water supply. A matching regulatory regime of watering days and so on.
Ms GEORGE —I will not pursue the issue of pine plantations with you then either. Obviously, that is not in your bailiwick either.
Dr Humphries —We would be quite happy to see them gone, from our point of view. But I guess they have got to be replaced with something.
Ms GEORGE —In terms of practicalities, we heard just before you from the department and the State Sustainability Strategy. To what extent do the state principles and strategies have an impact on your thinking as a pretty important corporate player in the state delivering water services?
Dr Humphries —We have been very careful to align with those, although the sustainability journey I described for the Water Corporation really predated the State Sustainability Strategy. We had intense dialogue with the people doing that work while it was developing, and I am comfortable that what we are doing is in no way in conflict with it and we are very supportive of their efforts.
Ms GEORGE —Would you have done what you are doing anyway or did that—
Dr Humphries —I think so, yes.
Mr Ferguson —We would have done it anyway, yes.
Dr Humphries —It was much more a survival issue for the Water Corporation at the time.
Ms GEORGE —In terms of progressing where we go from here, part of the dilemma is that you can write a fantastic statement of sustainability principles but the extent to which it actually gets integrated into people’s operations and practice is another matter. How important is a carrot and stick approach to really driving change?
Dr Humphries —The papers we have tabled answer that question, in part, but we have our own set of sustainability principles which we map like this—I will table these. There are 18 of them, which sounds like a lot, but they map the environmental, social and economic elements, as well as stakeholders, ethical behaviour and good governance systems. There is a front nine, which are outcome related principles, and a back nine. We are systematically applying these principles as a test of all business decision making, no matter in what area. It is, effectively, a fundamental and simplifying element of governance. You do not need necessarily high levels of detailed work instructions or regulations if people are simply reflecting on and testing their business thinking—whatever their business is—against a set of robust principles.
That goes back to the point I made in the introduction—that there really does need to be an agreed set of principles which then effectively radiate out to all parts of government. It forces integration. To give you a small story, I had a discussion with some of our pricing people and I asked them what the social and environmental effects of a proposed new water service pricing regime would be. They said, ‘We don’t know; we’re pricing experts.’ I said, ‘We’ll help you, but we really need to investigate that, because a particular pricing regime may either be driving wastage of water or it may be disadvantaging socially poorly-off people.’
Every decision is connected, and these principles help force the joining up of the thinking relating to that. Even if somebody does not have a particular interest in or expertise in the environmental aspects of their issue, our emerging governance system is driving that. My view, which is a personal one and not a Water Corporation one, is that we really need to apply something similar in government. We are operating, effectively, in parallel universes, at both state and Commonwealth level amongst agencies, with quite severe dysfunction being caused from time to time because of conflicts in resourcing, or emphasis, or whatever.
Mr Ferguson —A couple of practical examples: the planning we do for future assets now, for water supply, wastewater and drainage are all done on a sustainability basis. We do not just pick the lowest net present value solution that will satisfy the minimum regulatory requirements; we consider the environmental, social and economic specifically and we map that out. That has driven some significant changes in the way we approach planning, the way we talk to the stakeholders and the community about what is planned, consider the environmental impacts and any offsets that might be applicable.
You may be aware that the south-west Yarragadee aquifer is potentially the next major source for the integrated water supply scheme for Perth. That has been the most extensive sustainability study that has been undertaken for a water source in Australia at least, if not broader than that. It took a number of years, but the government is in the final throes of considering it at the moment. There was a separate sustainability panel which oversaw it, and provided some separate advice to government, as well as the environmental advice.
We have been conscious of practical application of sustainability principles into our business. The business has always been sustainable to the extent that we have always had a view, in terms of water resources at least, that you cannot take out more than is sustainable, otherwise you are going to run out and you will have to find something else. Particularly on a state wide basis, where some of the resources are quite small, if you do something that adversely affects that, then finding something else can be extremely expensive, as well as being disruptive in terms of social and environmental implications. They are just a couple of examples of the things we do. I heard before some mention about the supply chain and how we approach that.
Dr Humphries —We have, compatible with state supply, a project to green the supply chain. It is not very advanced at present, but there is a lot of dialogue within the water industry generally about improving procurement practices to drive that sort of thing. I think there will be quite significant change over the next couple of years.
Mr TICEHURST —For the last 30 years I have been living on tank water. One of the first things you learn when you move from the city into a regional area is that if you turn the taps on and nothing happens you have to change your water use practices.
Dr Humphries —Yes.
Mr TICEHURST —You generally find that that happens very quickly when you have to then go and source water in a hurry. With the application we saw yesterday, essentially with desal we were told that there was a 20 per cent increased cost in producing that water compared to, say, recycling. If you have these plants along the coast you have an almost infinite supply of water, subject to the available energy. There is a business unit, so if you were a commercial business you have an opportunity there to encourage water use rather than to have programs where people would use less water. Is that part of the thinking of your sustainability—that you will have programs where households would be encouraged to use less water through education?
Dr Humphries —Yes, that operates at several levels. We have statutory watering restrictions—although they are the mildest of any mainland Australian city at present—and that is a curfew of two days a week, depending on house numbers. We also have a Waterwise campaign with subsidised water efficiency appliances, including rainwater tanks, low-flow shower heads and five-star rated dishwashers and things. The key point is that the cost of new water sources now—and it does not matter what they are, be it the south-west Yarragadee aquifer which is currently under public debate, desalination, or using the same sort of technology to reclaim wastewater as Queensland is actively pursuing now, and we are doing to a smaller extent—are so expensive that demand reduction is actually a better business outcome. We are not particularly tempted to simply produce infinite amounts of water for profligate use, because it does not make financial sense, let alone environmental sense. I do not think there is any water utility in the country that is trying to sell more water; quite the contrary.
Mr Ferguson —We have specific targets for consumption per person or per annum, which we are currently pretty close to in terms of efficient use of water across the state. Our focus may be a little different than some others. Because the majority of the water is used by residences—and I guess part of that comes back to industry putting in their own bores and use of groundwater—our focus has been on garden watering, hence the two day a week sprinkler roster, which has brought consumption from 180-plus kilolitres per person per annum down to currently 155, which is being maintained at that level. I think it is likely that the two day a week restriction will stay into the future, no matter what source capacity we have.
We have a program which educates people in schools. We have Waterwise schools who go through a program, so there is an educational component. We have recycling targets as well, in terms of the proportion of wastewater that we recycle. The standards for recycling of wastewater here are very high. Our plan, as we told you about yesterday, is to put it back into the Gnangara Mound. Basically, the requirements are that it has to be desalinated before it goes back into the ground. When you are doing that you are talking about the cost of seawater desalination and recycling which is different, because if you have to desalinate it before you put it back into the ground then you have the same or a very similar cost structure. The differences are about transportation and the source. You have the ocean on the one hand and a wastewater treatment plant as a source on the other hand, but one of the big issues in terms of the costs is how far you have to transport it, because of the infrastructure, particularly in built-up urban areas. It becomes quite expensive and socially, and sometimes environmentally, disruptive as well to do that.
Mr TICEHURST —You mentioned water tanks. Are you providing support for water tank installations?
Dr Humphries —Yes.
Mr Ferguson —The government subsidises water tanks.
Mr TICEHURST —Throughout the state?
Dr Humphries —Yes.
Mr TICEHURST —Is that an efficient way, though, to store water?
Dr Humphries —Not particularly for a Mediterranean climate. It is very expensive, but there is a lot of popularity for both that and greywater recycling. I think that the best solutions are very location specific, quite frankly. In Sydney, which is supposed to have rain all year, small tanks work quite well, but we have seven to eight months of no rain here, so the tank has to be very large. Because most of Perth is built on a sand plain, you have a free tank underneath your house, so why would you build one?
There may be some grounds for smaller tanks for maybe greywater capture and back into toilet flushing and stuff, but there is a cost-benefit argument in that which differs from state to state and even within parts of Perth. People up in the hills behind Perth mostly have rainwater tanks, but they are quite uncommon on the coastal plain. Adelaide has about 50 per cent of its housing stock with tanks, and they have a similar climate to us but with very little groundwater.
Mr JENKINS —I had two questions but Mr Ticehurst, in asking his question about growing a market versus getting people to reduce their use, has reduced it to one. I wish to preface my one question by saying that you have given us a lot of stuff to look at. The business principle wheel as a way that the corporation goes about its decision making is very interesting. My question then leads away from the wheel, but as a corporation there is an expectation that you will pay a dividend back to government. Is that right?
Dr Humphries —Yes.
Mr JENKINS —I am a bit worried that, in the government setting a dividend, it will impinge upon the way you are able to go about your very thorough governance issues.
Dr Humphries —Certainly the Water Corporation is not self-determining. We, for example, have to get Treasury agreement to our borrowing levels. Unlike normal companies, water utilities have to predeclare their dividend at the beginning of the trading year. You do not work out how well you have done at the end of it and then decide how much you distribute. You get signed up at the beginning, which adds an interesting rigour to the business.
Paul might like to comment on this, too, but I think that there is increasingly better dialogue about these things, and one thing that that principal approach is driving is lowest whole-of-life costs rather than cheapest net present value. That is beginning to influence our own capital decision making, and that may mean 15 to 20 per cent more capital because you may be able to adopt a gravity solution instead of a pumped one to moving water around. We have those debates within the corporation, obviously, but I think we are engaging people in Treasury with the same sorts of ideas, and our economic regulator here.
Mr Ferguson —A lot of the things we do intrinsically have a social dimension to them. The pricing for water, which the state government makes decisions on, has a lot of the implications. I am not telling you anything you do not already know about pricing, but there are a lot of social issues embedded in that in terms of the affordability of water for people on low incomes et cetera compared to a stepped pricing structure—the more you use, the more you pay. People who are using a lot of water are paying the full cost almost.
Dr Humphries —Just the rice growers of Dalkeith!
Mr Ferguson —But I think we have a reasonable autonomy in terms of how we go about our business. I do not see at the moment any impediments to us in terms of our approach to sustainability. In terms of the planning we have been doing recently, taking a sustainability approach has not necessarily added significantly to the cost. It just makes us more aware of all the issues that we have to deal with, to make sure that we are not trading off the economic versus the social or the environmental. We want to make sure we have a positive outcome on all of those. I do not think there are any constraints at the moment that prohibit us from doing what we are doing, other than the normal constraints that operate in any business in terms of availability of funds to do what is required.
Ms GEORGE —Do you have some understanding with government about the level of reinvestment in capital and expansion and—
Mr Ferguson —We have a really significant capital program. It is in excess of $4 billion over the next five years. We have invested in excess of $1 billion in the last decade in new water sources, as a result of climate change. A desalination plant opened today. I think an understanding of the implications of climate change and its impact on our business is becoming really clear to everybody, and we have not been precluded from making those investments that are necessary to provide the services that we are required to provide.
Ms GEORGE —With a booming state economy, you do not have the same pressure on government as the other states.
Mr Ferguson —Yes, but the investment in the decade up to, say, 2004 before the economy was booming was still $1 billion. So we are making those sorts of investments anyway, in terms of making sure we can cope with the growth as well as the negative impacts of climate change, particularly on water resources because the inflow from our dams has dropped by 75 per cent.
Ms GEORGE —I have heard the argument expressed by others in Mal’s and Ken’s part of the chamber that the reason why there has been a lack of planning for the future is that in some state jurisdictions the call of government on the profits of the state instrumentalities has been more important in terms of priorities than allowing them to reinvest in—
Dr Humphries —I am not sure that that is actually true. What I think was more important—and this was certainly a discussion within our organisation—was the perceived risk by the senior executive and the board of potentially investing in a white elephant if aggressive infrastructure capacity increases were paid for and then it started raining again.
We have been fortunate in the sense of having very persistent low availability of environmental water. That enabled us to go to government and say, ‘Look, we’ve got no way of predicting the future. This is very serious. If we don’t start investing now, we’ll really be in severe water shortage.’ The Premier took over the water portfolio at about that time and things really began to happen, but there was significant activity even before that period.
I do not think that same dialogue has been had in south-eastern Australia to the same degree. The climate change predictions for south-eastern Australia are, in a superficial sense, more benign than for the south-west. They are talking about a 10 per cent reduction in rainfall over 25 years, and I think people just sort of internalised that as thinking, ‘Oh, that’s reasonably easy to adjust to. It’ll be linear and gradual and we’ll have a soft landing instead of a stepped-down change like we’ve had here.’ Of course, the south-east actually has had a stepped-down change, at least related to the El Nino drought, which has sort of snapped them out of that thinking.
That is not meant in any way to reflect negatively on our eastern water colleagues, but I think it was more about being concerned about being embarrassed about overinvesting in things as well.
Mr Ferguson —I think that some of the biggest issues we are facing getting our new water sources off the ground are social and environmental; not the financial so much. You always have to convince people that what you want to do is a valid investment in terms of the services we are required to provide. We operate under a licence. We have to meet certain conditions. The investment of capital funds is always pretty well scrutinised from inside the organisation as well as outside.
In terms of new water sources in particular, talking about new dams is not on because you do not know where the rainfall is going and you have no reliability. Nobody wants to build any new dams anyway from a social and environmental point of view. So then you have to diversify into other options, and you saw a few of them the other day. We made it clear that any industrial use down at Kwinana has to come from recycling. With the desalination plant, we are looking at different options from those we might have looked at a decade ago. We are making sure that we have a diverse view of what those options are, that they are sustainable, given what we know about climate change—at least for the moment—in terms of the future and that they are economically viable, socially acceptable and environmentally acceptable. We want to make sure all of those things come to pass.
Dr Humphries —Could I just make one comment? The community does not understand the link between energy and water very well. Water is really heavy stuff and the water industry is a very large user of mostly electricity. In acknowledgment of that, for an urban water utility in Australia the greenhouse gas emissions related to the use of power for the movement and water and wastewater would be between 60 per cent and 80 per cent of their ecological footprint. Sydney has done some rigorous work on it. We have basically accepted their numbers without doing our homework. That logically means that, if you are serious about sustainability, you need to address that issue. That began dialogue in the Water Corporation which actually did not take very long to resolve.
We have committed to greenhouse neutrality by 2030. I think we can quite easily achieve it sooner than that, but then our finance people and potentially people in the economic regulation authority, asked us, ‘Have you got a social licence for this, because it may cost more if you are buying renewable or other sources?’ We just last October I think it was carried out a statistically valid community survey here.
After people were talked through the relationship between moving water and the amount of power it takes, and that the Water Corporation is the second biggest user of grid power in Western Australia, they simply said, ‘Yes, we want you to be greenhouse neutral. Yes, we want you to do it tomorrow.’ And irrespective of financial status of the interviewee, they were willing to pay up to $20 per service more. Our estimate is that it would be about $6 to do it, which is way below the rate of inflation in terms of water pricing, so it gives us a lot of confidence that we are on the right track.
Ms GEORGE —I must say, I was a bit sceptical about desalination in terms of the energy import and the brine, but those concerns have been somewhat allayed by what is happening in practice here and I think drawing to the wind farm to the extent that you have committed to do probably takes a lot of those concerns and provides a bit of an impetus for renewables to get off the ground, if you have major customers like the Water Corporation drawing on their reserves.
CHAIR —Gentlemen, time is certainly up. Thanks again for your hospitality yesterday. We appreciate that and a good presentation today too. We wish you the best for the south-west area.
Resolved (on motion by Ms George):
That this committee authorises the publication of evidence given before it at public hearing this day.
Committee adjourned at 2.13 pm