National sewerage company Indah Water Konsortium Sdn Bhd (IWK), which incurred accumulated losses of RM888.81 million until end-2010, had successfully developed a better sewerage system in the country after 17 years of handling, but was found wanting on the financial performance front, according to the Auditor-General (A-G) Report 2011.
“IWK’s financial performance was not satisfactory as the company could not generate profit and was too dependent on government subsidies to cover rising operating expenses,” according to the report which was released at the Dewan Rakyat yesterday.
IWK had been experiencing “continuous losses”, with accumulated losses of RM888.81 million as at end-2010, the report said.
This was one of the weaknesses pointed out by the annual audit report by a team headed by Auditor-General Tan Sri Ambrin Buang.
Among others, the report noted that a total of 23 out 47 government companies posted pre-tax profit totalling RM255.83 billion for three consecutive years between 2008 and 2010, while nine companies suffered accumulated losses amounting to RM2.45 billion for three consecutive years.
On IWK, apart from the continued losses, the report said it had also shown weaknesses in its operations and maintenance of sewerage systems, such as cases of theft at the sewage treatment plant involving an estimated loss of RM25.4 million.
In an email response to The Malaysian Reserve, IWK said the company’s lacklustre financial performance was due to the fixed tariff structure and low tariff rates introduced since 1997.
“At the same time, the operational cost is constantly rising due to increase in the number of plants acquired, which now numbered 6,712. Apart from acquisitions, it is also due to sewerage system improvements, revised environmental quality standards that have been raised to a higher level and the need to improve the quality of services provided,” the company said in its email response. At this point, the A-G report acknowledged the need for a tariff review.
It said the Ministry of Energy, Green Technology and Water, Ministry of Finance and National Water Services Commission “should support IWK’s application on the country’s sewerage tariff to ensure that the rate is compatible with current situation.”
On subsidy, IWK said the government subsidises sewerage services to maintain the low tariffs which have not been increased close to two decades.
It added that the operational cost would certainly increase without a review of the tariff as joint sewerage users now number close to 20 million.
The report noted that there were weaknesses in the operations and maintenance of sewerage systems such as cases of theft at the sewage treatment plant involving an estimated loss of RM25.4 million.
It also said that sewage water was not treated according to standards, damage to the structure of plant and violations of effluent standard that resulted in a charge of licence fee amounting to RM1.55 billion, and project was not properly planned and certificate of completion was issued for the project which failed its main component testing and commissioning.
In June 2000, the government through the Minister of Finance Inc took over the entire equity of IWK worth RM100 million from the previous private owners at a price of RM192.54 million.--TheMalaysianReserve
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