KUALA LUMPUR (Feb 24): Malaysia may need to restructure its water supply system to reduce non-revenue water (NRW) losses but a full federal takeover of water assets is considered sensitive, Deputy Prime Minister and Minister of Energy Transition and Water Transformation Datuk Fadillah Yusof told the Dewan Rakyat on Tuesday (Feb 24).

He said the government is looking at other business models because replacing old water pipes — the main cause of NRW — requires huge investment.

“Suggestions that were given during discussion sessions, studies and workshops with stakeholders have taken note of proposals such as the federal government taking over the entire water operations but the matter is rather sensitive,” he said.

Considerations before pursuing large-scale private investment to address the issue include whether investors are willing to fund pipe replacement on an expedited basis, the size of the required investment and the level of tariffs that would be imposed to recover the costs, the minister said. 

“In the end, the tariff will be paid by the people. This is also a question that we need to examine in detail and we must involve the states and all stakeholders to determine the best business model to resolve this issue. In my personal view, we do need restructuring to overcome the NRW problem,” Fadillah said.

“If not, this problem will not be resolved for decades. Many new cities have gone through similar issues. We need to sit together and find the best solution,” he said, adding that the specific model must be carefully considered. 

Fadillah was responding to a supplementary question from Datuk Muhammad Bakhtiar Wan Chik (Balik Pulau-PH), who suggested that it may be time for the government to consider structural reforms or a new governance approach to ensure NRW is resolved once and for all. 

The MP pointed to disparities in water management across states and raised concerns that differing incentives may have affected efforts to reduce NRW.

NRW mainly refers to treated water that is lost before reaching consumers due to leaks, pipe bursts, theft or inaccurate metering. High NRW levels increase operating costs and reduce the efficiency of water supply systems.

Water supply services in Peninsular Malaysia and the Federal Territories are regulated by the National Water Services Commission (SPAN), which oversees licensing, tariff approvals and compliance. Water assets, meanwhile, are largely managed by Pengurusan Aset Air Bhd (PAAB), a federal entity that finances and owns water infrastructure before leasing it to state operators.

Despite an allocation of RM2.525 billion under Budget 2025, Malaysia failed to meet its target of reducing NRW to 31% this year which the minister attributed to “the weak financial position of water operators as a result of existing water tariff rates that do not reflect the actual cost of operations, which has limited the ability of operators to implement existing NRW reduction programmes.”

Fadillah added that, as members of Parliament are aware, responsibility for planning and developing water supply infrastructure at the state level — including efforts to reduce NRW — lies with the respective state water operators.

“Therefore, water operators need to play their role in efforts to reduce NRW towards achieving the targets that have been set,” he said.

He was responding to a question from Datuk Sri Tuan Ibrahim Tuan Man (Kubang Kerian-PN), who asked why the 31% NRW target for 2025 was not achieved despite the allocation and what immediate and concrete corrective measures are being taken to reach the 25% target by 2030.

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