‘Water tariff revision needed to keep operators afloat’

KUALA LUMPUR: Water supply operators are in an unsustainable financial position as their revenue cannot cover capital and operational expenditure, says the National Water Services Commission (SPAN).

Its chief executive officer Datuk Ahmad Faizal Abdul Rahman said the average total tariff charged to consumers in Peninsular Malaysia and Labuan was RM1.37 per cubic metre.

However, capital expenditure and operating expense required to provide treated water to consumers was RM1.68 per cubic metre, he said in an interview.

While the structural work to provide for water resources such as dams, piping to rivers, intakes, off-river storage and weirs were undertaken by the government, he said, water operators were required to build the infrastructure, carry out piping works and pay salaries to treat the water.

He said operators were required to invest billions in terms of capital expenditure.

This included energy cost to run water treatment plants, which are one the largest consumers of electricity as they have to run 24 hours a day, 365 days a year.

The costs for energy, manpower, chemicals and machinery increased yearly in the chain of water treatment.

Ahmad Faizal said by right, if the pricing of utilities like water was adjusted from time to time, it would allow for the service provider to catch up with the price hikes.

“However, looking at the water industry, there are states which have not revised their water tariffs for more than 25 years. For example, Pahang has not reviewed the rate for the past 39 years. For Perlis, it’s 26 years and Kelantan nine,” he said.

The lack of funds has given rise to several concerns.

One of them is the failure of water operators to replace old and leaking pipes.

He said 34% of non-revenue water was caused by burst pipes.

“I have one state that reports about 6,000 cases of burst pipes on a daily basis,” said Ahmad Faizal.

Another is the failure of some operators to meet water quality standards.

“One state is not able to meet the minimum criteria set by the World Health Organisation,” he said.

To mitigate the issue, Ahmad Faizal said SPAN, which is the regulatory body set up to monitor the water services industry, along with the Water and Environment Ministry were working towards implementing a tariff setting mechanism that would enable operators to cover costs incurred and eventually reap a controlled level of profit.

He said several solutions had been proposed including for all states to have the same tariff structure.

The number of payment categories or bands will also be reduced for easier monitoring.

“We have proposed that only two bands be introduced – domestic and non-domestic.

“Industry, livestock farming, manufacturing, farming, laundry services and hair salons, for example, will fall under the second category.

“Special categories for shipping and houses of worship will remain,” he said.

SPAN has also proposed a new average rate of RM1.62 per cubic metre, which is 25sen more than the current average rate of RM1.37 per cubic metre.