Palyja to hike drinking water rates soon

JAKARTA (JP): PT PAM Lyonnaise Jaya (Palyja), a French water management firm, expected to reach an agreement by the end of this month with its local partner, city-owned PAM Jaya drinking water company, for a hike in water costs, its executive disclosed on Monday.

Speaking to reporters, Palyja president Pierre Alla said the price increase at the customer level was quite important so that the difference between the rate paid by customers to PAM and those paid by PAM to Palyja could be gradually lowered.

At present, he said, customers paid Rp 2,600 (25 U.S. cents) per cubic meter to PAM Jaya, while the latter had to pay Rp 3,000 per cubic meter to the foreign firm.

"That means there is a gap between what we are contracted to charge and what we actually get," he explained.

According to him, PAM Jaya is expected to raise the fee charged to its customers, while Palyja is expected to lower its charge to PAM Jaya.

"Both are going to make an effort to reduce and to raise the fee so that at the end there will be no more shortfall," Alla said, adding that the shortfall is currently counted as PAM Jaya's debt to Palyja since they signed the 1997 deal.

The new rate and other details of the planned hike, he said, are still under negotiation.

He explained the hike would be important for Palyja for its investment plan to properly supply clean water to PAM Jaya's customers in the western part of the capital.

"We hope that much of the negotiations will be settled by the end of this month," he said.

"What we have proposed is to amortize the debt over 23 years, but we're not going to ask for a payment of the (PAM) debt right now, but we're looking for that it to be amortized over the duration of the contract," Alla explained.

Palyja is PAM Jaya's foreign water management partner, which signed its contract in 1997 for 25 years.

Under its contract, Palyja will provide the western part of Jakarta with drinking water by the year 2005. But the economic crisis in 1997 forced the company to delay the plan to 2010.

Consequently, the company allocated the $200 million for its investment, including to renew pipelines and build proper distribution network, over a period of 10 years instead of the targeted five years, Alla went on.

"What we are discussing is during which period of time, we're going to spread the investment, are we going to do it all now, or are we going to do it step by step," he said.

At first, he said, his company planned to invest more than Rp 100 billion this year for the improvement of the water quality, to renovate and to extend the water distribution network.

"It (investment amount) may have to be reduced according to the renegotiation on the fees," he explained.

"The initial commitment was to invest $200 million over a five year period, $60 million of which has already been spent," he said.

Palyja serves 210,000 customers in the western part of Jakarta.

Some 300,000 PAM Jaya customers in the eastern part of the capital are served by the British firm, Thames Pam Jaya. (bkm)