Cost Recovery and Tariffs
The Ministry of Home Affairs Decree No. 23/2006 sets out a policy of full cost recovery through tariff revenues for water utilities. The decree prescribes an increasing-block water tariff with a first subsidized tariff block for a consumption of up to 10 cubic meters per household, and a break-even tariff for higher consumption. Commercial and industrial users can be charged higher tariffs with higher blocks at the full-cost tariff. However, in reality, few utilities recover their costs. According to a 2005 study by the Department of Public Works, most PDAMs faced financial problems. Only about a third increased tariffs between 1998 and 2005. One third of utilities had foreign debt, whose value in local currency increased substantially due to the devaluation of the rupeeh in the 1998 financial crisis. Many PDAMs defaulted on loans they had received from the Ministry of Finance. As of 2009 renegotiation of these loans (principal, interest and penalties) was still underway, thus cutting off the utilities from new government loans.
According to the Asian Development Bank, in Jakarta the average tariff in 2001 (average of residential and commercial users) was US$ 0.29/m3, compared to production costs estimated at only US$ 0.11/m3. 98% of revenues billed were collected. According to these figures, at least the Jakarta utility managed to recover its costs. Since then tariffs have been increased several times and, according to the International Benchmarking Network for Water and Sanitation Utilities, reached US$ 0.77/m3.
As in many other countries, those not connected to water supply networks pay the most for water. A survey in North Jakarta found the price of water in the early 1990s was $2.62/m3 for vendor customers, $1.26/m3 for standpipe customers, $1.08/m3 for household resales customers, and only $0.18/m3 for connected households.
Read more about this topic: Water Supply And Sanitation In Indonesia
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