OFFICIALS have found a way to save $500 million on phase one of the sewage scheme to clean up Hongkong's heavily polluted waters, freeing more money for other parts of the massive project. The entire scheme needs $17.8 billion and the Governor, Mr Chris Patten, has promised to allocate $8.3 billion, including the $4.5 billion for phase one and $3.8 billion for sewer improvements in Central, Wan Chai, Kowloon and the New Territories. The rest of the money, which will have to come from the post-1997 administration, is needed to build a 35-kilometre pipe to dispose of partially treated sewage in the South China Sea and for other sewer work. Environmental Pollution Advisory Committee members were told yesterday that savings of at least $500 million had been found on phase one by linking more areas into the system. It was unclear how the saved money would be used or whether it was included in Financial Secretary Mr Hamish Macleod's budget last month. About $3.4 billion of the $8.3 billion is to come from charges to householders and industry, which are due to be proposed shortly. The Government will contribute the remaining $4.9 billion, which was boosted by $1.9 billion in the budget speech from earlier estimates. Advisory committee chairman Dr Wang Gung-wu said members welcomed the savings, which were probably broader than the $500 million mentioned because the changes to the scheme would free land for sale. ''These are ways of improving the system and saving money that can be diverted to the [overall] scheme,'' he said. The changes involve eliminating separate sewage treatment systems for Tseung Kwan O and the north and southwest of Hongkong Island, which would have required considerable investment and land requirements. Also, two rudimentary screening plants to remove solids will be closed, freeing further land. These areas now will all be hooked into the $4.5 billion phase one of the strategy through deep underground tunnels, which will carry the sewage to large treatment plants on Stonecutters Island and Mount Davis. About 90 per cent of sewage from urban areas is currently dumped untreated into Victoria Harbour. ''Altogether, there will be significant improvements in pollution in Victoria Harbour once the [treatment plants are] commissioned,'' Dr Wang said. The committee also heard yesterday of the Environmental Protection Department's proposals for dealing with air pollution from vehicles. Stricter engine standards for new vehicles and a cleaner type of diesel fuel may be introduced within the next two years, along with tough maintenance requirements for all vehicles. The department also plans to revive a scheme to switch taxis, light goods vehicles and other smaller vehicles from diesel to petrol.