Selangor yet to negotiate with federal govt on water

BERNAMA, February 26, 2009

SHAH ALAM: The water review panel, formed by the Selangor Government to review the restructuring of the water industry in the state, has yet to begin negotiations with the Federal Goverment for the acquisition of its water assets.

One of the panel members, Prof Dr Subramaniam Pillay, told a media briefing that the Federal Government had not met the panel to negotiate the take over of the state assets in the industry, that is, piping systems and 27 treatment plants worth about RM9 billion.

The water industry concessionaires in Selangor, namely Puncak Niaga (M) Sdn Bhd and Syarikat Pengeluaran Air Selangor Sdn Bhd (SPLASH), each own a water treatment plant in the state, said Pillay who is associate professor at the Nottingham University campus in Malaysia.

At the moment, Pengurusan Aset Air Bhd (PAAB) has moved in to negotiate directly with the four water concessionaires in the state, namely Puncak Niaga, SPLASH, Syarikat Bekalan Air Selangor Sdn Bhd (SYABAs) and Konsortium ABASS Sdn Bhd (Abass) in the restructuring of the water industry.

Under the initial restructuring plan, the Selangor Government via state controlled company, Kumpulan Darul Ehsan Bhd (KDEB), will take over the concessions and the assets to hand them over to PAAb, a wholly-owned company under the Ministry of Finance Inc.

The assets would then be leased back to KDEB as the sole licensed operator, as after the restructuring, there would be no more concessionaire, but a licence issued to the operator, subject to a review by the Federal Goverment within certain number of years, he said.

The existing four concessionaires had also rejected an offer by the state government to take over their assets and concessions for RM5.7 billion (RM1.1 billion for concessions and RM4.6 billion for assets) on Feb 20, this year, he said.

Among the reasons cited in a news report was that the offer was lower than their expectations.

However, another member panel, Tony Pua, said the state government believed that if it was given the licence to be the sole operator of the industry, it could provide cheaper water tariff to the public, due to the existing economies of scale in Selangor and maintain the free water policy for the first 20 cubic metre.

At present, the average price per cubic metre of water in Selangor for domestic use was 77sen, and this year, with the existing economies of scale in Selangor, the water tariff could be brought down by 10 percent to 69sen, and by 25 percent to 57sen in 2013, said Pua, who is also Petaling Jaya Utara assemblyman and a corporate lawyer.

He said this could be done through better management of the water industry, adding that Penang, which is smaller than Selangor, had proved it could supply water for domestic use at 37sen per cubic metre.

Should the state government fail to hand over its water assets to PAAB by March 31, this year, the water tariff could shoot up by 37percent.

There is also talk that SYABAS would likely get the licence if the Federal Government took over the state water assets, said Pua. - Bernama