BY GEROME DALIPE IV
ILOILO City – The proposed takeover of the Iloilo Bulk Water Supply Project by a private firm has sparked concerns, especially regarding the financial aspects for the province’s taxpayers and the potential increase in water tariffs.
Aboitiz InfraCapital Inc. has proposed to build, operate, and maintain the bulk water project that will supply 80 million liters per day (MLD) of potable treated water to consumers in the city and province of Iloilo. The proposed P8.45-billion unsolicited concession is for 33 years.
Under the proposed scheme, the company would sell treated bulk water directly to local government units (LGUs) at a suggested P51 cubic per meter.
The rate is double compared to the current water price of P20 per cubic meter for the first 10 cubic meters consumed by customers.
In this arrangement, the LGUs would act as “middlemen” since they would buy the treated water from Aboitiz and then resell it to distributors, water districts, or other buyers who provide water directly to consumers.
However several stakeholders have expressed apprehension that the scheme will require the city and province of Iloilo the necessary capacity, expertise, and infrastructure to handle these transactions effectively.
Hence, such a setup could expose LGUs to financial risks if the cost of purchasing bulk water from Aboitiz is high such as when issues on payment collection from downstream distributors arise.
LGUs may also need to secure funding or subsidies to manage these costs, potentially straining local budgets.
The scheme will also have several potential impacts on water tariffs and water availability concerns in the Ilonggo community.
As intermediaries, LGUs would likely increase water rates by up to P30 per cubic meter to cover their costs and generate revenues.
The result could be steep increases in water tariffs, which could negatively affect affordability for households and businesses, particularly in lower-income areas where water costs already consume a significant portion of the household budget.
Since Aboitiz’s proposal entails a guarantee in the form of an availability fee, the deal means that should the provincial government fail to sell the capacity, the payments shall be taken from taxpayer money through its contingent liability.
The scheme is also not a typical public-private partnership (PPP) set up since the proponent does not take the risk of finding an entity or large users of water resources.
Here, the burden is transferred to the LGUs, which are not in the business of running a distribution operation of water resources.
If LGUs lack the capacity or resources to manage the intermediary process efficiently, it could lead to operational inefficiencies, delays in water delivery, or additional costs that would ultimately be passed on to consumers.
When sought for comment, the Metro Iloilo Water District highlighted government-to-government (G2G) transactions, which would significantly bring the bulk water cost down.
This framework involves collaboration between various government entities at the local, regional, and national levels.
The PPC Center reported on its website the unsolicited proposal was endorsed to the Capitol and the city government, the proposed implementing agencies for the project, on August 9, 2024.
On the same date, the PPP Center received a letter from the Iloilo City Government that it was rejecting the unsolicited proposal. The PPP Center has not received a copy of the decision of the province on whether to proceed with the detailed evaluation of the project.
In his recent press briefing, Gov. Arthur Defensor Jr. said they currently evaluating the proposal, emphasizing that the evaluation is still ongoing and confidential./PN
