Indah Water, RapidKL deep in red

AUDIT REPORT Two major government-owned companies - Indah Water Konsortium (IWK) Sdn Bhd and RapidKL Sdn Bhd - have posted major losses, according to the Auditor-General's Report 2011.

IWK recorded accumulated losses of RM888.81 million as at 2010, while RapidKL had incurred accumulated losses totalling RM293.82 million.

According to the audit team, IWK performed its sewerage treatment role well, but depended too much on government subsidies while struggling to put a lid on its soaring operating costs.

"Based on the audited financial statement, IWK recorded an increase in revenue amounting to RM156.03 million (27.5 percent increase) in 2009, but the revenue decreased in 2010 by RM105.34 million (a 14.6 percent drop).

"This was caused by a reduction in government subsidy and a reduction in revenue from charges for domestic and commercial sanitation services," the audit report states.

IWK in its reply to the Auditor-General's Department said the solution to overcome this was to raise the tariff for raw sewerage treatment relative to water usage, as outlined in its business plan in 2009.

Not fully compliant

The audit report quotes a United Nations study stating that 96 percent of the population enjoyed access to sanitation services, with 93 percent of the population having "good" services.

However, the report also notes that IWK records showed that in 2011, of the 5,714 treatment facilities tested, 7.5 percent did not fulfil the government-stipulated effluent standards.

A separate study by the Department of Environment between 2008 and 2011 showed that of the 844 plants tested, 6.3 percent did not fulfil the stipulated effluent standards.

In closing, the audit report suggests that, among others, the Energy, Green Technology and Water Ministry, Finance Ministry and the National Water Services Commission (Span) consider IWK's proposal to raise the tariff.

Finance Ministry Inc took full control of IWK in 2000. It controls all sanitation services in the country except in Sabah, Sarawak, Kelantan and Johor.

RapidKL seeks fare increase

As for RapidKL, the audit report notes that it recorded an accumulated loss of RM293.82 million as of 2010, while recording a profit of RM54.57 million in 2009.

The report notes that the profit RapidKL recorded was due to the RM112.23 million it received under the 2009 economic stimulus package.

In a reply to the audit team, RapidKL said the losses were the result of rising salaries for staff and maintenance costs, while fares had stagnated since 2005.

RapidKL added that it would be increasingly difficult to keep up with operational costs unless fares were raised in the near future, thus requiring more assistance from the federal government.

According to a chart on RapidKL's financial performance, there was a five-fold increase in administrative costs, from RM14.39 million in 2009 to RM75.07 million in 2010.

This particular issue was not discussed by the audit team.

Buses not fully utilised

The audit team also notes that in 2011, only 75.2 percent of RapidKL's 939-strong fleet was operational.

"The percentage of buses in operation is not 100 percent. Among others, this was caused by a lack of bus drivers.

"This can affect the level of bus services and passengers will need to wait longer in between buses," reads the report.

Of the entire fleet, four models - Dong Feng 120, Dong Feng 75, Iveco and King Long Suzhou - were particularly prone to maintenance work and less than 50 percent of 340 coaches involved were usable as of June 2011.

The audit found that there is no scheduled maintenance (of buses). Maintenance is only performed whenever needed.

The audit team warns that RapidKL runs a risk of lacking sufficient numbers of buses to stand in for buses that breakdown while servicing routes.

"RapidKL should improve its repair and maintenance process to ensure that the number of operational buses are increased," the report states.