Monday, March 02, 2009

SYABAS v PBA

The Selangor State Government has promised that if we were to take over the operations and maintenance of the water concessions in Selangor, we will be able to immediately offer a 10% reduction in water tariffs, while longer term improvements in efficiency will easily bring about a 25% reduction in tariffs within 5 years. Instead a bailout is now in progress for these private water concessionaires.

Here's a clear illustration of why it can easily be done by comparing what the people of Selangor pays for water today, relative to our friends in Penang.


The above shows clearly that at the people of Selangor are being fleeced for its water for at every stage, Syabas charges more than double the rates charged by Perbadanan Bekalan Air (PBA) Pulau Pinang! 

In fact, if you use only 38m³ of water a month, in Penang you'd be paying the rate of RM0.42, while in Selangor, you'd be paying a whopping rate of RM2.00, or nearly 5 times the price!  Or in absolute terms, you'll be paying RM11.96 in Penang, but it's an incredible RM32.85 in Selangor and KL!
What's more, PBA is very profitable (check the accounts) despite the lower water rates. It made RM31.3 million last year on revenues of RM187.8 million, or a very decent net profit margin (after tax) of 16.7%.  Therefore Syabas which supplies much more water than Penang, should have the economies of scale to offer even lower prices than Penang!

Hence for the Selangor state to promise that we can cut the fat in Syabas to reduce rates by 25% within 5 years is "chicken feet"!

However, when asked by The Star, the Minister immediately dismissed our pledge:
How can the state reduce the tariffs? To avoid the hike, it would have to compensate the concessionaires and this could amount to RM38 million a month. If we take over the assets, it would be much lower than the 31% [scheduled] tariff hike.
The Minister misses the point, whether intentionally or otherwise.

The whole idea about asking the Federal Government to support Selangor's takeover offer is so that we can get out of the crony contract signed by the previous Minister, which allowed Syabas to increase rates in 2009 by up to 37%, or a monthly RM38 million compensation in exchange.

If Selangor government takes over the assets and concession, we will then be able to offer not just a token "lower tariff hike" but actually be able to cut rates by 10% immediately, and more after working off the fats in the system.
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