Water Resource in Indonesia: Depok Water Utility Company

(PDAM) Case
Individual Report

Abstract

Indonesia currently faces serious challenges in water allocation. As the population

grows, the demand for clean water and proper sanitation increases. This report
investigates the current state of water allocation in Indonesia, how clean water is
processed, distributed to users, and regulated. The report is based on a research at
Depok Water Utility Company (PDAM) on April 13th 2016.

Keywords: Water, sanitation, PDAM

I. Introduction to Water Allocation Problems in Indonesia

Water Resource
Indonesia- the largest island country-situated between the Indian and Pacific Oceans
has over 5,590 rivers. According to FAO Water Report 2012, Indonesia has total
internal natural renewable water resources around 2,018.3 km3/year. Surface water
resources are an estimated 1,972.6 km3/year and groundwater resources 457.4
km3/year. An estimated 90 percent of the groundwater, about 411.7 km3/year, returns
as baseflow to the rivers. It is assumed that only 30 percent of groundwater resources,
or 137.2 km3/year, are consumable (Bakosurtanal, 2001). Therefore, Groundwater
potential in Indonesia is very limited. However, much of the eastern islands depend on
groundwater because of surface water scarcity. Over-abstraction of groundwater in
Jakarta has caused saline groundwater to reach about 10 km inland from the coastline
and has led to land subsidence at a rate of 2-34 cm/year in east Jakarta.

Indonesia has average rainfall above 2,000 mm on most islands, except for the Lesser
Sunda Islands where it is 1,500 mm (FAO, 1999). About 80% of rain falls during the
rainy season (October to April). In Sumatera, Kalimantan, Sulawesi, Maluku and Irian,
water is available as the resource is abundant. However, in parts of Java, Bali and the
Lesser Sunda Islands, water shortages often occur during the dry season. In particular
in Java, the dry season flows are inadequate to meet the demand, leading to irrigation
shortages (Ministry of Public Works, 2005).

In Indonesia, water utilities abstract water from rivers and lakes (60%), springs (25%)
and groundwater (15%). Shallow groundwater and springs are still the main sources of
water on most islands, for those who are self-supplied or receive water from
community-based organizations. On Sumatra and Irian, however, rainwater harvesting
is also an important water source (BPS, 2002).

Water Access
With large estimated population of almost 260 million people (BPS, 2016), Indonesia
faces a high demand for clean water and sanitation. However, the supply of clean water
becomes scarce due to the poor water infrastructure (World Bank, 2013). As water
becomes the centre of humans activities, this inadequate water supply could cause
various types of illness such as diarrhea, typhoid, skin infections, until death. The water
and sanitation targets of the seventh Millennium Development Goal (MDG) are
achieving access rates of 68.9% for safe water and 62.4% for improved sanitation. The
2010 census shows that Indonesia needs to reach an additional 56.8 million people with
safe water supply by 2015. (UNICEF Indonesia Issue Brief, 2012).

According to the Joint Monitoring Program for Water Supply and Sanitation by WHO
and UNICEF (2010), 82% of Indonesian population has access to an improved water
source and 54% for access to improved sanitation. Neighboring countries, such as
Malaysia and Vietnam, have almost 100% of their populations with access to improved
water resource and sanitation facilities. In Asia, Indonesia has one of the lowest
sewerage coverage levels with only 2 percent access in urban areas. Untreated or semi-
treated excreta and wastewater-often found into local drains or water bodies-could
cause a severe water pollution to people and the environment (Water and Sanitation
Program, 2011).

II. Water Policy and Regulation in Indonesia

Policy and regulation of water resource in Indonesia is based on Undang Undang Dasar
1945 (UUD 1945) Pasal 33 Ayat 2 and 3, that say,

(2) Branches of production that are important for the state and dominate the life of the
people, are controlled by the State.

(3) Earth , water and natural resources contained in which, are controlled by the State
and used for the prosperity of the people

Based on UUD 1945, Undang-undang No. 11 Tahun 1974 about irrigation was applied.
However, as the industry and society improve, this law became irrelevant in some
points. In result, new law Undang-undang No. 7 Tahun 2004 about water resource was
set. However, this new law causes conflicts as the points about private company that
could exploit water was not clearly restricted that could cause further exploitation and
disadvantages to the people as water users. This also contradicts to UUD 1945 that
water resource must be regulated by the State for the prosperity of Indonesian people.
For example,

Due to the potential legal loopholes of UU No. 7 Tahun 2004, the petition for
examination of the law was proposed by the national board of Muhammadiyah and
other organizations to The Indonesian Constitutional Court (MK). In 2015, MK
abolished UU No. 7 Tahun 2004 and in order to prevent a legal vacuum, UU No. 11
Tahun 1974 on irrigation is reinstated. However, UU No. 11 Tahun 1974 only consists
of 17 articles, in contrast to 100 articles in the abolished Water Resource Law. The
1974 law was irrelevant, as it was a New Order government product, signed by General
Soeharto, whose purpose was to induce swasembada pangan (food self-sufficiency).
The Absence of Law
The consequence is, 83 items that are not in UU No. 11 Tahun 1974 are unregulated.
For example, in abolished Water Resource Law (UU No. 7 Tahun 2004), there is
regulation about groundwater extraction that causes land subsidence and saltwater
intrusions in major cities, including Jakarta, which has been a problem. To implement
the law, the government enacted regulation 43/2008 as the regulation details for the
control and management of groundwater, including the maximum debit that can be
harvested, its licensing and the diameters of pipes allowed to be employed (Jakartapost,
2015). But since the Water Resource Law is no longer applicable, the groundwater
would become unregulated.
The other of example of consequences in the absence of law is the unregulated bottled
water companies that could do whatever they want to increase profits as there is no
restriction about their businesses by the government. The water source in UU No. 11
Tahun 1974 is also not regulated while in UU No. 7 Tahun 2004, strong protection for
water sources through imprisonment, penalties and criminal sanctions for both
corporate and natural persons are provided (Jakartapost, 2015).
At the end of the year 2015, the government already issued implementing regulations
to UU No. 11 Tahun 1974 to fill the legal gaps such as Government Regulation
(Peraturan Pemerintah RI) No. 122 Tahun 2015 on Drinking Water Provision System
and Ministerial Regulation of Ministry of Public Works and Public Housing No.
01/PRT/M/2016 on Licensing Procedures of Water Resource Exploitation and Use.
However, more complex and detailed implementing regulations are needed to regulate
todays issues Indonesia faces. Therefore, the new law needs to be constructed to cover
up the irrelevance in Irrigation Law and flaws in Water Resource Law.
Tax Regulation
In Indonesia, groundwater and surface water tax are regulated generally in UU No. 28
Tahun 2009 about Local Tax and Local Retribution, specifically by the local
government. For example, in Perda No. 17 Tahun 2010 by Jakarta local government,
the tax subject is individual or business entities that benefit in extracting the water. The
groundwater tax tariff is 20% by considering type of water source, the location, the
purpose, the volume and quality of the water, also the damage caused by water use.
The same tariff is also applied in areas around Jakarta, such as Depok, West Java.

For surface water, in Riau, according to Peraturan Gubernur No. 37 Tahun 2012, the
tariff is 10%. The calculation would be Tariff x the Acquisition Value of Water x
Volume of Water Used.

III. Market Allocation of Water

A. Theoretically
Water trading in water market aims to reallocate water to more economically
productivity activities (Hodgson, 2006). This should be Pareto efficient that socially
optimal allocation is an allocation that no one can be made better off without the others
worse off, includes compensating transfers of money to losers (Chong, 2006). Water
trading would cause benefits if several conditions are met, which, voluntary buyers and
sellers, allocation of vested rights, adequate information, well-defined rights,
transferable from land rights, and changeable types of water use.
B. PDAM Case

In PDAM Depok, raw water from river is processed to clean water, but not drinkable
yet. In this process, they need to filter and clean the polluted water with chemical
substances. One of the problems they face is that the water processing source is located
next to tahu (bean curd) factory and a cow farm where all the waste is thrown away to
the river. This results in high water pollution and result in bigger efforts by PDAM to
sterilize and process the water. Therefore, more chemical substances are needed.
Besides it, the water is also more polluted in dry season. After the process finishes, the
waste should not be wasted directly, but must through sedimentation because of the
chemical substances in the waste such as chlorine. The PDAM Depoks cost structure
is mainly allocated for chemical substances, other are pipes, service maintainance cost,
and others.

The other problem is there is limited amount of fund in expanding the business of water,
for example in processing the water to become drinkable, buying more equipments to
reach more households, and chemical substances. From demand side, there is still low
demand from the households around Sawangan, Depok, that many households still use
wells as the water from wells is free access. In the customer relation aspect, there is not
any serious problem since the staffs of PDAM Depok always gives fast-response to the
complaints of the customers. One problem found is sometimes the water distributed to
the customers is still muddy, even though in the lab the standard was fulfilled. This
might be due to other materials in the pipes that are mixed into the water, while it is
being distributed. The staffs of PDAM would have to always control the distribution
and act responsively to customers complaints.

In Perda Depok No. 11 Tahun 2011, the tariff for PDAM Depok is regulated. Tariff is
set based on affordability and fairness, service quality, recovery cost, water use
efficiency, transparency and accountability, and protection of primary water. The
director of PDAM propose the tariff and the final decision is made by the local
government, Mayor of Depok, with approval from Board of Supervisory. PDAM
Depok set the price Rp4500,00 per cubic of water for the use less than 10 cubic.
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Bakorsurtanal. 2001. Neraca Sumberdaya Air Spasial Nasional (National Spatial Water
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Chong, Howard and Sunding, David. 2006. Water Markets and Trading. Annual
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FAO Aquastat:Indonesia, version 1999, retrieved on October 17, 2010.
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Hodgson, Stephen. 2006. Modern water rights, theory and practice. Food and
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