KUALA LUMPUR: State water operators will incur hundreds of millions in revenue losses if they are not allowed to set water tariffs, the government told the Dewan Rakyat.
Natural resources, environment, and climate change minister Nik Nazmi Nik Ahmad reiterated that some states had not raised water tariffs for 40 years while 60% of treated water in some others did not reach consumers.
He said the average water tariff price in the peninsula and Labuan – expected to increase to RM1.59 per cubic metre from RM1.43 per cubic metre due to adjustments approved by the previous government – was still lower if one took into account the water operators’ capital expenditure and operating expense, which was RM2.03 per cubic metre.
“Therefore, if we postpone (letting water operators set tariffs), they will incur revenue losses estimated at RM490 million per year,” said Nik Nazmi in his winding-up speech at the committee stage debate of the 2024 supply bill.
“Non-revenue water has already caused RM2 billion per year in losses for water operators. Therefore, we feel that the time has come, and menteris besar and chief ministers across parties have agreed on this (to let operators set tariffs).”
He was responding to Cha Kee Chin (PH-Rasah) who said earlier in the Dewan Rakyat that giving state water operators the authority to set tariffs could lead to higher inflation.
Cha said decisions to permit state-level water operators to adjust tariffs had always been made by the National Water Services Commission or the Cabinet, a system that should remain in place.
Caps will be set on tariff adjustments
In response to Nik Nazmi’s explanation, Cha expressed concern that there was a possible conflict of interest as the state leaders who agreed with the government’s proposal also chaired the authorities managing water supply.
To this, Nik Nazmi replied that these state leaders had merely agreed in principle and there were no black-and-white agreements yet.
He assured that the government would not allow a “free-for-all” situation, and said it would create a mechanism to focus on states that had not raised their tariffs for a long time.
“We will set a ceiling (rate) and leave actions to be taken to the operators. They may want to increase (the tariff rate) by half or by 100%.
“But we have a cap, meaning we will not permit the increases (of tariff rates) at the whims and fancies of water operators,” added Nik Nazmi.
On Nov 1, Nik Nazmi said a Cabinet paper proposing a new method for water tariff determination was in the works, to allow state-level water operators to decide their tariffs independently.