Foreign water firms clarify statements on subsidies

JAKARTA (JP): Two foreign partners of city-owned tap water company PDAM Jaya expressed objections on Friday over a recent statement by an executive of the firm on water subsidies.

"The statements by the PDAM Jaya executive are misleading and untrue. We only presume that this person did not speak on behalf of the company," presidents of the two foreign companies said in a joint statement.

The executive said on Tuesday that PDAM Jaya desperately needed Rp 234 billion in subsidies from the city administration to cover a deficit incurred from supplying water at a fixed rate.

The executive, who asked for anonymity, said the rate, set at Rp 2,086 per cubic meter, would remain unchanged until next year, while operational costs, chemical prices and inflation continue to increase due to depreciation of the rupiah.

She said the primary reason for subsidies was the high inflation rate, which has increased from 9 percent to 17 percent.

John Hurcom of PT Thames Pam Jaya (TPJ) and Christian Michelon of PT Pam Lyonnaise Jaya (Palyja) said inflation had sharply increased operational costs of almost all utilities in Indonesia.

But unlike most utilities, Governor Sutiyoso had decided not to increase water tariffs until the year 2000, they said.

The inevitable consequence was that operating costs exceeded revenues, leading to a deficit, they said.

"It's happening right across Indonesia for all water companies," they said, without supplying details on the deficit.

They said the cooperation agreement for Jakarta's water system provided an indexation formula to ensure the water charge paid to the private firms evolved in line with company costs such as chemicals, electricity and salaries.

They said the formula was based on actual costs and indices published by the Central Bureau of Statistics with the aim of protecting all parties involved.

Last October, the firms proposed solutions to the problem. Their plans were still being reviewed by a special team of the city administration assisted by World Bank consultants, they said.

"Our proposals are aimed at reducing and managing the deficit between revenue and costs so that no further burden on Jakartans, the city administration and PDAM Jaya occurs, during what we know is a difficult time," they said.

"We are convinced that a satisfactory arrangement for all parties will be reached shortly." (jun)