PAM Jaya, the water board of Indonesia's capital city province, DKI Jakarta, is becoming increasingly critical of its two, foreign-owned water contractors, Lyonnaise Jaya (Palyja) and Aetra Air Jakarta. Like an estimated 75% of Indonesia's local water boards, PAM Jaya is heavily indebted; last year its director, Haryadi Priyohutomo, reported that the company’s debts exceeded Rp 300 billion.
In 1997, when Palyja and PT Thames PAM Jaya (which was later taken over by Aetra) were appointed to supply water, PAM Jaya was in dire need of restructuring and funding to pay off debts and increase the supply and quality of water.
Half of the province's clean water supply is from Jatiluhur dam in West Java, 80 km from the city. It is channelled through West Tarum Barat canal into water treatment facilities owned by the two water operators. Under their contracts, PAM Jaya pays Palyja and Aetra water charges for the water they provide to customers.
The latest water charge PAM Jaya paid the contractors, however, was above the average water rate customers paid PAM Jaya, which was Rp 7,000 (around 70 cents) per cubic metre.
Based on their income brackets Jakartans pay different water rates to PAM Jaya, with the lowest rates just over Rp 1,000 per cubic metre and the highest at around Rp 14,000.This arrangement has continually caused PAM Jaya losses because most of its customers pay less than the standard water rate. “75% [of customers] pay less than the standard rates,” Riant Nugroho, a member of the province's water regulatory body, told The Jakarta Post.
Water quality
Continuing poor water quality is a major concern of the provincial government as large companies are turning to their own water treatment instead of paying top bracket prices to the water companies.
“Some companies have begun to plan ways to recycle their water using reverse osmosis technology,” said Nugroho. PT Pembangunan Jaya Ancol, which owns Ancol Dreamland Park, and PT Pelindo II, one of Indonesia’s seaport operators, had both begun researching this option, he said.
Firdaus Ali, an environmental expert of the University of Indonesia assigned to the independent water regulatory body by Jakarta Governor Fauzi Bowo, is critical of the performance of both contractors. “If you ask me, I would agree to terminate Palyja and Aetra,” he told Arientha Primanita of The Jakarta Globe. "However, if [the province] cancels its contracts it would have to pay roughly Rp 5.7 trillion [$615.6 million] and,' he said, alluding to contracts written in favour of the contractors, "if the two companies cancelled the contract, the [province] will still have to pay Rp 3.7 trillion.”
Legal threat
The Indonesian Legal Aid Foundation (YLBHI) is currently planning to file both a civil and criminal suit against Palyja for allegedly providing poor service to residents of Muara Baru, North Jakarta and Tulus Abadi of the Indonesian Consumer Protection Foundation (YLKI) said his office will work with the YLBHI to support the actions.
In the past 10 years, he said, clean water and electricity were the top subjects of customer complaints submitted to the YLKI. "We receive hundreds of complaints every year. We received 450 complaints about [PAM Jaya] in 2008," he told Indah Setiawati of The Jakarta Post. He said complaints included poor water quality, inconsistency of water flow and changes to the customer category, which affected the water tariff.
However, according to PAM Jaya's latest report quoted by the newspaper, the two operators showed "satisfying" performances in 2009. The number of customers increased by 2.1% to 795,149 from the previous year. Palyja's non-revenue water (NRW), or water loss, reached 43.9%, a decrease of 1.4%, while Aetra's NRW reached 48.6%, a decline of 2.1%. The report said the two contractors sold 267.4 million cubic metres of water in 2009, an increase of 3.% from 2008.
In November last year, Governor Bowo announced that the province's clean water coverage stood at 63% and he was aiming to increase that to 70% within five years. He also foreshadowed a new cross-subsidy scheme for water rates. “We will charge the upper-middle customers with an additional tariff to fund the supply for the poor,” he said.
Cross-subsidies
The Governor said that since the majority of the customers served by the two water distributors were considered low income, the size of the subsidies to be paid by bigger earners would be significant. He said he'd also asked the water operators to reduce pipe leakage and waste but the saving measures had not yet gone far enough.
Meyritha Maryanie, a Palyja representative, said the company expected an increase in water rates because the price had been frozen for three years. She added that the upper-middle class customers the governor was referring to were those who paid water rates of between Rp 6,800 to Rp 12,550 (73 cents to $1.34) per cubic metre.
She declined to give details about the company’s recommendation to the city administration, but said that the increase would not exceed the charge to the groundwater tariff. The groundwater tariff was increased to Rp 8,000 to Rp 20,000 per cubic metre from Rp 525 to Rp 3,000 per cubic metre. “The increase is important for the cross-subsidy for low-income water consumers,” she said adding that the water tariff for those in the low income group was now Rp 1,050 to Rp.3,550 per cubic metre.
To widenlow-income access to clean water, Palyja has launched a water installation program funded by a World Bank grant. In the scheme, new water connection fees are reportedly set at Rp 120,000 compared to the regular fee of Rp 620,000.
Palyja said it has invested $2.5 million in the program with its expenditure to be reimbursed after accounts had been audited. Maryanie said the World Bank will not disburse the subsidy if usage is less than 10 cubic metres per month because that meant people were not using the clean water.
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