Professional Documents
Culture Documents
Sandhyavitri Ari, Water Supply Operation
Sandhyavitri Ari, Water Supply Operation
Various threats in the operation of water supply industry (PDAMs) in Indonesia were identified, this paper
highlighted six major threats, they may include; limited scale of PDAMs service coverage; limited access to
capital investment; low water tariff and poor cost recovery to pay debts and project operation; poor staff
performances, high levels of unaccounted for water, and political as well as environmental risks. Strategic
plans for mitigation of the threats were proposed at three levels of authority: (i) at the Central Government
level; (ii) local/regional governments; and (iii) water utilities. By understanding the nature of the PDAMs
threats, and better preparation of holistic strategy for managing the identified threats at various
governmental levels, it is expected that sustainability of PDAMs operation might be achieved
systematically.
Key words: strategy, water supply, PDAMs, performances, sustainability, operation.
Overview
Most of the urban municipalities in Indonesia have been supplying with taps water by 303 public water
supply industries (PDAMs). For the past 10 years, the proportion of urban population served by PDAMs’
water was not significantly increased. PDAMs have supplied water for 40% of urban population (BPS,
1997; Sutjahjo, 2000, and Lanti, 2007). Therefore, there is a need to: (i) evaluate the operation performance
of PDAMs; and (ii) draw strategy to alleviate the threats and ensuring sustainable operation of the industry.
Table 1 PDAMs’ scale, percentage of customers and revenue generation (PDAMs’ scale is based on Decree
letter no. 800.690.154 dated 5 March 1996 issued by the Public Works Department).
Classification No. of No. of Percenta Total Percenta Revenue
(scale) connections PDAMs ge (%) percentage ge of total
(%) customer
s
A (S = small) < 10,000 218 71.9 %
B (M = 10,000 to 77 25.4 % 97.3 % 67.7 % 58.4 %
Medium) 50,000
C (L = large) 50,000 to 5 1.7 %
100,000 2.7 % 32.3 % 41.6 %
D (V = very > 100,000 3 1.0 %
large)
In 2008, it is estimated that the proportion of urban population served by PDAMs was approximately 40
million people with 110 litre consumption per day (Sandhyavitri, 2002 and Lanti, 2007). Total PDAMs
1
SANDHYAVITRI
service coverage may reach 6.5 million connections, dominated by the domestic sector (87%). The
industrial and commercial sectors, however only constituted 6.6% of the total connections, these sectors pay
much higher water tariffs. For example, in Pekanbaru City 2007, the average water tariff for house
connection was Rp. 1,250 (US$ 0.14, @ US$ 1 = Rp. 9,000), and industrial sector was Rp. 3,500 (US$
0.50). The implementation of the cross subsidy scheme between the industrial sector and domestic sector has
not been adequate to cover the overall PDAMs cost expenditure.
Furthermore PDAMs have experienced difficulties in loan repayments as a result of poor cost recoveries and
failures in the identification of financial risks (i.e. the impact of potentially fluctuating currency and interest
rates). Once the host currency (Rupiah, Rp.) depreciates against hard currency (i.e. US$), there is little
opportunity for PDAMs to pay loans as it happened in the Indonesia Economic Crisis of 1997. Hence,
PDAMs seek Central Government help to clear all PDAMs debt interest (Rp. 4.5 trillion) in order to ease
PDAMs’ financial deficiencies, and attract private sector finance (Tempo, 2006).
2
SANDHYAVITRI
business operation. For example: recruitment of new staffs (which often unfit for business purposes); and
political pressure delays processing of water tariff adjustments.
At the Central Government level, the actions include: strengthening regulatory frameworks regarding
UWS operation strategies and plans; adequate provision for project financing to increase water supply
capacity and service coverage; capacity building; and monitoring procedures. Reducing or clearing total
accumulation of PDAMs debts and financial charges (fortunately, the Central Government agreed to clear
200 PDAMs debts up to Rp. 100 billion each PDAMs, as long as PDAMs improve their management and
service performance) (Westjavawater, 2004). There is also a need for relaxation of PSP regulation and
facilitate transformation procedures in the operation and management of water supply from public utilities to
private operators to provide fresh capital investment, and to improve the operation performance.
At local government levels, various actions should be considered such as strong commitments in
improvement of operation and management performance, regulating reasonable water tariffs, capacity
building (i.e. commencing staff training, implementation of IT and recruitment of professionals)
investigation of commercial aspects operating UWS projects in order to attract private investors, and better
control and monitor of water use (e.g. establishing Water Board Authority).
3
SANDHYAVITRI
• Reduction of Political Interference and environmental risks. The reduction of political influence in
the operation and management of PDAMs could be facilitated through out fundamental shift in PDAMs
business organisation, from the public sector to the private operator, and separation of the roles of
project owners (i.e. municipalities) and project operators (i.e. PDAMs). Reduction of environmental
risks, such as reduction of water pollution risks at its source by imposing stringent environmental
regulation (PDAMs approach Environmental Agency and local government together to do so).
Conclusion
Strategic plans for mitigation of the threats were proposed at three authority levels: (i) at the Central
Government level; (ii) local/regional governments; and (iii) water utilities.
At the Central Government level the actions are emphasised on strengthening regulatory frameworks,
providing adequate provision for project finance and human resources development, and improving
monitoring procedures. At local government levels the actions may include strong government
commitments to improve UWS performance and regulate reasonable water tariffs, improvement in capacity
building, investigation of commercial aspects in financing and operation of WRM and UWS projects, and
better control and monitoring of water use. At water companies level the actions proposed to improve UWS
performance include: (i) optimisation of commercial aspects in the operation and management of PDAMs;
(ii) improvement of technical and managerial performance; and (iii) reduction of political and physical
geographical influences.
Acknowledgement
The author would like to extend thanks to Robert J. Young, Tony Merna, and Peter Harpum for their
significant contributions in reading and editing this paper.
References
BPS, 2007 in http://www.bps.go.id/statbysector/socwel/tables.shtml
Chatib, B., (1999), " Water Utility Rescue Program and the Role of Perpamsi", Journal of Air Minum, No.
85/Th. XX - July 1999, ISSN No. 0126-2785, Jakarta.
Lanti, Ahmad, 2007, Review of Infrastructure Sector Regulation in Indonesia, in
www.eapirf.org/files/AGM2007/NO4_EAPIRF-Lanti.pdf
Ministry of Economic Coordination, 2008, Infrastructure Finance, International Symposium FSTPT,
Semarang, Indonesia.
Sandhyavitri, Ari, 2002, “Fundamental Elements of Sustainability in Urban Water Supply: Case Studies in
Indonesia”, PhD Thesis, Manchester Centre for Civil and Construction Engineering University of
Manchester Institute of Science and Technology, UMIST, UK.
Sutjahjo, 2000, " Kebijakan Kemitraan Pemerintah dan Swasta dalam Penyediaan Air Minum Perkotaan",
Journal of Air Minum, No. 87/Th. XXI, ISSN No. 0126-2785, Perpamsi, Jakarta.
Tempo, 2006, in www.tempointeraktif.com/hg/ekbis/2006/02/02/brk,20060202-73349.html
Westjavawater, 2004 in http://westjavawater.blogspot.com/2004/11
Contact details
Name of Author: Sandhyavitri, Ari
Address : Civil Engineering Department, Faculty of Engineering, University of Riau, Kampus Binawidya,
Panam, KM12,5, Pekanbaru, Riau, Indonesia
Tel: +62 761 7076556
Fax: +62 761 566821
Email: ari@unri.ac.id
www : http://airport.unri.ac.id