THE National Water Services Industry Restructuring (NWSIR) process started in 2004 just few years after centralised sewerage operation in Malaysia was bailed out using taxpayers’ money.
Many model for the water services industry that was used (including concession agreements) have failed to meet proper outcome. Based on NWSIR, all water operators needed to be consolidated under single company within the states and government water agencies were required to be corporatised. This is an important move to ensure transparency.
Centralised sewerage operations needed to be ring fenced and merged with state water companies in stages between 2011 and 2015. This move will merge the water treatment, water supply and sewerage services under each state water company to improve operational viability and sustainability. However, this step is still not being implemented and this will further impact water services sector in the long run.
NWSIR is implemented using Water Services Industry Act 2006 (WSIA) which was enforced from Jan 1,2008. A 30-year full cost recovery plan was drawn up to turn around water services using Pengurusan Aset Air Bhd (PAAB) as financial facility until the sector reaches full cost recovery.
The profit under NWSIR and WSIA model is regulated where additional revenue generated can be capped to plough back into tariff rebalancing or speed up lease rental payment. This mechanism is to ensure improving water services via rapid infrastructure developments while minimises cost impact to tariff.
A transparent tariff setting mechanism was developed to use benchmarking method (using simple iteration mechanism) to only allow regulated cost as well as least cost to tariff. Any cost component that is higher than the benchmarked cost will not be allowed to be passed to tariff. This step is to increase cost efficiency and eliminate bloated cost being passed to consumer.
However, to date, the National Water Services Commission (Suruhanjaya Perkhidmatan Air Negara, SPAN) has failed to implement this step. Thus, we have made it clear to SPAN that the Association of Water and Energy Research Malaysia (Awer) is against all tariff reviews and proposals after 2016.
Another core issue under NWSIR is non-revenue water (NRW). NRW is treated water that is loss in the water supply system due to mainly leakages and other minor technical faults as well as theft. In Malaysia, almost one-third of treated water is lost in the system and does not bring revenue to the water companies. The government set 25% NRW target for 2020 but failed to achieve it.
The government must implement the following to save the water services sector:
► Merger of water treatment-water supply-sewerage services under state based water company by parceling centralised sewerage operations must be completed by 2025;
► Clear NRW reduction target and Key Performance Index must be set;
► Implement Transparent Tariff Setting Mechanism using benchmarking method immediately;
► NWSIR and WSIA model must be reverted back to original planning and all dilutions and derailments must be immediately rectified,
All approved projects that are delayed, abandoned and failed to meet approved capacity as well as performance must be investigated and published in SPAN website. Steps to blacklist the companies and board members must also be implemented,
► Overhauling SPAN, PAAB and the water ministry’s human capital.
We do not have much time left to complete restructuring of our water services sector. Therefore, the government must be both prudent and swift in completing NWSIR and WSIA model implementation or risk many more frequent water disruptions and higher NRW levels and take a plunge into water insecurity.
This article is contributed by Piarapakaran S, president of Awer, a non-government organisation involved in research and development in the fields of water, energy and environment.
Source: The Sun Daily
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