The average Malaysian household pay RM8 per month for the sewerage system.This fee was set in 1993. And has not seen an increase since then. And yet, over the course of two and a half decades, costs to manage the nation’s sewers have gone up dramatically.
This is very unsustainable because the current tariff is just too low. In fact, our tariff is one of the lowest in the world
"The sewerage industry in Malaysia is actually one of the best in the region” said Faizal Othman, CEO of IndahWater Konsortium (IWK). “Compared to other ASEAN countries such as Cambodia, Vietnam and Indonesia, our plants adopt modern technology and equipped with reliable systems to provide quality sewerage services” he continued.
"Malaysia has met the UN Millennium Development Goal to provide basic sanitation, where over 67 percent of the country’s population are in areas managed by IWK have access to connected sewerage services, whilst the rest are provided with some form of on-site facilities that secure public health and protect our environment" Faizal explained.
But the fact remains on whether the tariff rate set today is sufficient to finance IWK’s operations. "Personally, I feel that we are lucky because the government has put in lots of efforts and commitment into enhancing the sewerage industry. Among them, the federalisation of sewerage laws, establishing water & wastewater regulators to monitor and improve the industry and developing world class sewerage systems under the Greater Kuala Lumpur projects” emphasised Faizal.
“When was the last time you heard of an outbreak of water-borne disease? For the past 20 years, IWK has worked tirelessly to ensure that our water sources are protected from these diseases” he added.
“But you have to realise that IWK fees has not been changed since its inception in 1994, which we are looking at approximately RM8/month per household. This is very unsustainable because the current tariff is just too low. In fact, our tariff is one of the lowest in the world.” said Faizal.
The tariff of RM8 per house is far below than the 'break even' operational cost of RM120 per house per month
“Just imagine the operational & maintenance costs needed to manage more than 6000 plants and about 19,000 kilometres of sewerage pipes all over the country. We have also increased the number of staff and assets in order to continue providing quality services. Due to the low tariff, there is a disparity between revenue and operating cost that put a constraint on the financial health of the company. In actuality, the tariff of RM8 per house is far below than the 'break even' operational cost of RM120 per house per month." he continued.
IWK’s financials doesn’t paint a pretty picture either. “The OPEX for 2017 alone was a staggering RM798 million and this is expected to increase every year. At the same time, IWK's cash flow has been decreasing steadily over the years. As at Dec 2017, our cash flow was only RM186.5 million. The total cost versus our income is an alligator gap right now," he explained.
A good way to find out the solution for revamping Malaysia’s sewerage system is through volumetric tariff system. "Volumetric tariff takes into consideration the customers' water consumption and is a fairer measurement for customers as they only pay what they have used instead of being charged a flat rate under the current tariff. It also gives more power to customers in managing their bills by encouraging economical consumption of water. They can avoid high sewerage bills if they use water sparringly," Faizal said.
To find out more about the volumetric tariff system and how it works, watch the full interview below.
