Khalid confirmed The Edge Financial Daily’s report on the federal government looking at imposing a tariff hike, (albeit a lower one than the 37% in the concession agreement), but he seemed to be against the plan.
“The Minister (Datuk) Peter Chin said the (water) tariffs needed to be increased to ensure the financial security of private companies. Doing so effectively means that the government allows the burden of inefficient private companies operation to be transferred to the people instead.
“Malaysia has to learn from its past mistakes and move away from the practice of privatising profit and socialising losses,” Khalid said.
The luncheon aptly called “Restructuring Selangor’s Water Services Industry” suggests that the state government has aspirations of controlling Selangor’s water assets, which could also indicate that it is unlikely to give the thumbs-up for a water tariff hike in Selangor.
“We believe that there should be holistic water services industry in Selangor from its treatment all the way to distribution.
Ideally, it would be managed by the state government,” Khalid said.
Khalid. Photo by Chu Juck Seng
Other than the planned tariff hike for water distributor Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) being scuttled, this could also likely result in Minister of Energy, Green Technology and Water Datuk Peter Chin Fah Kui’s year-end deadline target for the consolidation of assets by Pengurusan Aset Air Bhd (PAAB), not being met.
This, however, should not come as a shock as the deadline has already been postponed several times.
At the luncheon, Khalid explained that the stalemate, which had blocked the consolidation, was brought about by the high price tag placed on the assets by the concession holders.
“The state government will have no part to play in this model. Until there is such a model that addresses the real needs of the industry, the state government is hesitant to participate. We do not want to overwhelmingly profit a certain party, while the others suffer as a result,” Khalid said.
“The state government was willing to negotiate further with the federal government, but we have found in these meetings that the offer price kept going higher and higher, merely in order to satisfy certain companies’ desires,” he added.
“To date, it is disappointing to note that the federal government has not done all it can within its mandate to exercise its powers to this end. As a federal government, it has the moral authority to take action on the basis of public national interest, but it has refrained from doing so although urged by the state government.”
This statement was possibly in reference to Khalid and Selangor’s attempt to terminate the concessions held by Syabas.
Khalid and his officials in Selangor have been looking to terminate the concession agreement of Syabas as the company has not lived up to certain tenets of its concession agreement. Among the more prominent ones was the reduction of no-revenue water to 28% by end-2008. This flew in the face of Puncak seeking a tariff hike of 37% in early 2009, as per its concession agreement, among others.
The four water concession holders are Syabas, Puncak Niaga (M) Sdn Bhd (PNSB), Syarikat Bekalan Air Selangor Holdings Bhd (Splash) and Konsortium Abass Sdn Bhd.
Puncak Niaga Holdings Bhd wholly owns PNSB and has 70% equity interest in Syabas. The remainder 30% in Syabas is also controlled by Kumpulan Perangsang Selangor Bhd (KPS), a 61%-unit of the state’s investment arm Kumpulan Darul Ehsan Bhd (KDEB).
Splash is 40%-controlled by construction giant Gamuda, KPS and Tan Sri Wan Azmi Wan Hamzah’s The Sweet Water Alliance each owns 30%.
Konsortium Abass is 55%-controlled by KPS and 45% by Operasi Murni Sdn Bhd.
Syabas has the mandate to supply treated water to Selangor, Kuala Lumpur and the federal capital Putrajaya, buying treated water from the three treatment players.
Puncak Niaga is 41%-controlled by Tan Sri Rozali Ismail, who is said to be close to Umno, the lead member of the ruling Barisan Nasional coalition.
Due to the Selangor state government’s decline to concede to demands of Syabas’ tariff hike, the water treatment players are on the verge of defaulting on their debts. Insiders said Syabas is only paying half of what it is supposed to pay the water treatment players, as its cashflow has been weak with soft loans from the federal government sustaining the company.
“The original reasons behind the privatisation were one, to increase efficiency based on supposed professional industrial expertise, and two, to allow the private sector to take responsibility for managing the water industry leaving the government to focus on policy decisions. It was seen as a solution for state governments to meet growing demand, escalating costs and low tariffs.
“Unbundling has led to the concentration of private participation in infrastructure in the more lucrative water treatment segment, leaving the unprofitable water distribution segment having to be paid for by the public sector,” Khalid said.
With this it seems likely that the water consolidation plan which is long overdue will be delayed further still.
Written by Jose Barrock
This article appeared in The Edge Financial Daily, September 29, 2010.
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