Discussion Room

Pricing water is a very controversial topic and there is plenty of disagreement about the “right” way of pricing it. Malaysian utilities had enough experience to not getting their water and sewerage tariffs applications approved as they deserved. Some of the points with regards to this are summarized below:

Points to Note

  • Water tariffs are a powerful management tool to achieve various objectives in the water and sanitation sector. However setting tariffs is a political process that is rife with controversy. Research has shown that low tariffs are set largely for political, rather than practical, purposes. Free water is often used as a campaign promise, for political gain. This political interference has been found to be a significant barrier to effective cost recovery.
  • Tariff structures are often complex and difficult to understand for consumers. People are not generally aware about the costs of providing water and sanitation services, it is difficult for them to judge what a “fair” or appropriate price to pay is. Moreover, it must be considered that poor in rural and remote areas without access to public water network are already paying a high proportion of their incomes either in excessive charges for poor quality water from water vendors, or in lost productivity through time taken by women to collect water from distant sources. Many poor would be willing and able to pay for appropriate low-cost services, if they were shown to be convenient and reliable
  • There is disagreement over the objectives of water pricing and tariff design. Tariff setting practices affects the goals of different stakeholders in conflicting ways: consumers need affordable and equal water services whereas utilities require stable revenues for cost recovery and economic efficiency. A tariff structure alone cannot cover all the needs.
  • Often, there is a lack of empirical data about how the application of different tariff structures affects water use for different consumer classes and how price changes would affect different categories of domestic and commercial customers.
  • Consumers are usually not involved in the design and setting of tariff structures and they cannot reject inappropriate tariff structures because these are typically set by the regulatory agency.
  • For Discussion : How much has this affected our Malaysian water utilities struggles for regular and fair tariff adjustment as allowed under the regulatory framework?
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