Tuesday, June 17, 2008

Free Water

This topic has been hanging in the air for a fairly long time, but I've yet to comment on it - partly because, the DAP MP for Klang, Charles Santiago has repeatedly given his views on this issue which I share wholeheartedly.

The Selangor Government has made it a point as one of the first 100 days target and achievement to be providing 20 cubic metres of free water to all households. And the Selangor Government achieved it through the simplest of means, the state government footing the bill for it to the water concessionaire.

I do not believe that this is the right policy prescription towards creating a more compassionate state, particularly for the lower-income groups - an objective which I share wholeheartedly. And providing free water to all households, without conditions, is a fairly inefficient way of achieving such an objective.

First of all, everyone, whether they can afford it or otherwise, gets the free water and hence the solution isn't targeted at all towards the lower income group. Secondly, so a policy typically encourages wastage despite water (particularly in Selangor) being a precious and scarce resource.

I remain consistent in my position that the best way to approach the problem of assisting the lower income group is to provide the cash benefits directly to them. That way, they can choose to spend the benefit according to their own personal needs, be it water, fuel or other basic necessities. Overall, for the same amount of money poured on subsidies, the poor will benefit more (as the wealthier groups will not get the subsidy). Or alternatively, for the same amount of subsidy per individual, the state will save more as they don't have to subsidise the wealthier households.

The government, both federal and state must re-look into the traditional ways by which we have forked out subsidies, their distortionary impact and untargeted mechanism in meeting their welfare objectives.

Below are some quotes from Charles, as reported in The Star and The Sun:
Coalition Against Water Privatisation (CAWP) coordinator Charles Santiago said the Selangor government should have done a comprehensive study before carrying out the move as the cost to be borne by the government would be too high.

“To subsidise 1.5 million households in Selangor, the government would have to fork out almost RM11mil per month and more than RM132 million a year,” he said.

He suggested that that the Selangor government should consider rain harvesting instead as it would save the people more than the RM11 they enjoy with the rebate.

“Through water audits, the water bills can also be reduced by up to 30-40%,” he said.

Santiago, who is also Klang MP, added that the rebate would also cause people to waste water as “people would waste anything that comes free”.

“In five years time, we will be facing a water crisis just as how we are facing an oil crisis now. We can live without petrol, but we can’t live without water,” he pointed out.


DAP’s Klang MP Charles Santiago said Selangor government’s first 20-cubic-metres (20,000 litres) free water policy was not properly well-thought before it was announced.

Santiago, who is also Coalition Against Water Privatisation (CAWP) coordinator, said: “I will maintain that households earning a monthly income of RM1,500 and below should still get free water. No question about it. I think those in the rich category would consider it an insult for not being charged.

“But the monies may have been better used for other facilities like helping buildings set up rain-harvesting systems which encourages conservation of processed water,” he told theSun when contacted.
It is worth noting that this "free water" policy will cost the Selangor state government RM10.4 million per month, or RM128 million a year. State governments are not known for their wealth, despite Selangor being the richest state in the country. RM128 million works out to a little more than 10% of the state's annual income. Is that the best way to expend a very substantial portion of the state's very limited funds and resources?
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