Government says almost all water firms nearly bankrupt

Moch. N. Kurniawan, The Jakarta Post, Jakarta

About 90 percent of 300 province- and regency-owned tap water companies (PDAMs) are in dire financial straits, raising fears of water price hikes and their likely privitization.

Bambang Guritno Sukamto, a director at the Ministry of Resettlement and Regional Infrastructure, said on Saturday the companies would collapse soon if the necessary action was not taken.

Tap water firms were in trouble because they were selling water at a price well below their production costs, he said.

"They can't even finance their operational costs, let alone invest to increase their reach or reduce leakages," he said.

The average water rate was set at Rp 1,400 (US 17 cent) per cubic meter, well below the production cost of Rp 1,485 per cubic meter.

In East Indonesia, the PDAM set the tariff at only Rp 500 per cubic meter and in the Selayar Regencies, the rate stood at Rp 2,000 a cubic meter, Sukamto said.

"There are a lot of problems in the PDAMs -- ranging from wastage measured at more than 40 percent, bad management and the fact that the water still only reaches 39 percent of the total population" Sukamto said.

The poor condition of tap water firms was revealed only a few days after the House of Representatives endorsed a water bill, which allowed for the privatization of the water sector.

Under the new law, the public would have their access to water limited for the sake of business interests -- ruling that water was no longer considered a purely public resource.

Water price hikes were an option for the government, he said, as the increase would force people to economize using water and at the same time could solve the financial problems facing the tap water firms.

"At present, we know that the price increase is a dilemma for both regional governments and PDAM executives, as water is considered a social good, which people should be able to get free or cheaply," he said.

Sukamto said the government had allotted about Rp 400 billion to build and repair water infrastructure across the country to give more people access to clean water. The program had also aimed at improving the management of the public-owned firms.

He said the funding was far from sufficient as the country needed annual budgets of Rp 30 trillion to reach the targets set.

"We set a target of providing at least 80 percent of the urban population and 40 percent of the rural population with access to clean water by 2015," he said.

Sukamto said inviting private firms to invest in tap water firms and in other areas was another way to raise the capital.

Indonesia needed to produce 200,000 liters of water a second nationwide to meet the 2015 target, an increase from the current capacity of 97,000 liters a second, he said.

Nila Ardhiani, of the Coalition for Public Access to Water, warned the government against the uncontrolled commercialization of the water sector.

Water resource laws would now allow central and regional administrations to issue permits to companies to commercialize previously public water, she said.

Dozens of drinking water companies -- including several foreign-owned firms -- have tapped fresh water springs to produce bottled water in the country. The drinking water business took 4.1 billion cubic meters of water in 2001.

Foreign companies also control the tap water business in Jakarta.