The Selangor Water Review Panel has unveiled the state’s plans to reduce water tariffs should its bid to restructure the state water industry succeeds.

For a start, the state plans to reduce water tariffs by 10 percent this year from the current RM0.77 to RM0.67 per cubic metre of water for domestic users.

selangor state plan to reduce water tariff 2606209 Ultimately, the state aims to reduce tariffs to RM0.57 per cubic metre for domestic users by 2013, a significant 25 percent reduction from current rates, said panel member Tony Pua.

The benchmark being used by the panel is the RM0.37 per cubic metre of water for domestic users in Penang managed by the state-owned Penang Water Supply Corporation (PBA).

"If Penang can do it (have low rates), definitely Selangor can do it because we have larger economies of scale. There is a larger population density (in Selangor).

"Technically, we should be able to even achieve lower rates than Penang," said another panel member and Nottingham University (Malaysia branch) associate professor Dr Subramaniam Pillay.

Syabas to resume monopoly?

Should status quo remain, private water distributor Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) is scheduled to raise tariffs by 37 percent on April 1.

Syabas’s concession agreement also allows the company, which monopolises water distribution in the state, Kuala Lumpur and Putrajaya, to raise tariffs further in 2012 (25 percent), 2015 (20 percent), 2019 (10 percent) and five percent every three years until the concession ends in 2030.

Pua and Subramaniam were among five of the nine-member panel who were at a special media briefing on the state’s role in the ongoing water restructuring exercise.

water production and ownership 260209 The Pakatan Rakyat Selangor state government is currently locked in a tussle with the federal government over control of water assets and four water concessionaires.

Underlying this are lucrative rights to deal water in the state which have already propelled Syabas and Puncak Niaga boss Rozali Ismail to become the 32 rd richest individual in Malaysia, according to the Feb 2008 edition of Malaysian Business .

While Pakatan Rakyat-led Selangor has promised to lower water tariffs, Pua claimed that should the federal government get its way, Syabas is most likely to resume its monopolistic position in the Selangor water industry and subsequently increase tariffs.

Syabas’ tainted history

Syabas, however, has a tainted history. According to a Jan 30 report by The Sun , auditors into Syabas accounts uncovered numerous irregularities. These include:

  • Awarding 72 percent of contracts worth RM600 million without open tender;
  • A discrepancy of RM325 million between the summary of contracts awarded in 2005, 2006 and 2007 and Syabas’ review document;
  • Spending RM51.2 million to renovate Syabas headquarters, despite Selangor Water Regulatory Department (JKAS) approving only RM23.3 million for the exercise in 2005

Other allegations in the report include Syabas’ decision to source RM325 worth of pipes from Indonesia instead of locally in 2005, in breach of finance ministry instructions.

rozali ismail puncak niaga According to Pua, another example of the ‘excess fat’ which Syabas had developed was the RM5.1 million paid in allowances to Rozali ( right ), according to the company’s 2007 annual report.

"In view of this, if the federal government wants to play hero, they should terminate Syabas’ concession," said another Water Review Panel member Fahda Nur Ahmad Kamar.

‘Terminate, not bail out!’

The panel also accused the federal government of trying to ‘bail out’ Syabas, which has debts of RM2.9 billion, according to the panel’s figures.

"Why is Syabas having a problem? They have a management agreement with Puncak Niaga. Every month, Syabas has to pay Puncak management fees amounting to RM700,000 since 2005.

"That is RM8.4 million annually and RM32 million since 2005. They own 70 percent of Syabas. Why won’t they have a cash flow problem?

charles santiago "This is something which the minister has to see and terminate Syabas’ concession instead of encouraging a bailout," said panel member and Klang MP Charles Santiago.

Several reports have indicated that the federal government, through the National Water Services Commission owned Pengurusan Aset Air Bhd (PAAB), was offering RM9 billion to the four concessionaires.

The Selangor government has accused the federal government of reneging its Jan 18, 2008, commitment to allow the state to handle water restructuring on its own.