The government defended the move to raise the water tariff, stating that Syarikat Bekalan Air Selangor Bhd (Syabas) was due to review the rate since Jan 1 this year.

Taking things a step further, Minister of Energy, Water and Communications, Dr Lim Keng Yaik announced Syabas would be compensated RM125m by the government for arrears that the private water concessionaire should have received since January.

The water tariff for Selangor, Kuala Lumpur and Putrajaya were increased on Wednesday, and was received with resounding criticisms by the public.

Lim told reporters yesterday that the the government had no choice but to allow Syabas to increase water tariff as it had met conditions stipulated in the concession agreement including that of reducing the rate of non-revenue water (NRW).

"Although the management of water will be taken over by the federal government with the establishment of the National Water Services Commission (SPAN), it still has to abide by earlier agreements including concessions awarded by state governments," the minister was quoted as saying by Bernama.

"My ministry has no control over water tariff in the states until SPAN begins operations. So do not ask me about this anymore," he added.

Syabas has sought federal government approval to increase the water tariff as its concessions involved areas within the Federal Territory. The government had agreed early month to increase water tariff in the Klang Valley but said it would not affect 42 per cent of its residents who consume less than 20 cubic metres of water a month.

He said the 10 month delay because an audit needed to be conducted by the government before it was approved.

Not in cash but grant

Lim said, however, that the Syabas would not see the compensation in the form of cash.

"That's because the government has decided that this should be paid out as capitation grant, which must be used by Syabas to replace the old water pipes in Selangor and Federal Territory.

"Replacing these water pipes will help reduce the huge volume, around 40%, of non-revenue water being lost annually and also ensure cleaner and better water supply to consumers. The current state of dirty water is due to the fact that many pipes have not been replaced for years," he added.

It was recently announced that a newly government mooted National Water Services Commission (SPAM), which would come into effect Jan 1, would prevent state governments from raising water rates without prior approval from the Federal Government. State governments, meanwhile, are able to increase rates till then.