JANUARY 20 — Malaysia’s 2025 water tariff reform has stirred strong reactions across households, industries and state governments. Selangor’s new tariff schedule and the Federation of Malaysian Manufacturers’ (FMM) cautionary statements underscore the same truth: cost recovery is long overdue. Every year, Malaysia loses over RM2 billion in Non-Revenue Water (NRW). Simply said, water that is treated, pumped and paid for never reaches consumers because it leaks through aging pipes or is lost through inefficiencies.
These losses don’t just hurt water operators; they undermine national progress towards SDG 6: Clean Water and Sanitation, which emphasises reliable, affordable and efficient water systems. The 2025 tariff hike is meant to be part of the solution. But the question remains: will it be enough?
Despite the latest tariff hike, most Malaysian states still operate below cost recovery, a situation highlighted in SPAN’s water sector analysis. The current average household tariff is RM1.54/m³, while treatment costs reach RM1.89/m³. This gap directly limits the ability of operators to fix pipes, modernise systems and reduce waste, which are key requirements of SDG Target 6.4 on water-use efficiency.
Global research reinforces this reality: international evidence consistently shows that underpricing water services undermines both infrastructure and governance. A report by the GWP/OECD Task Force on Water Security and Sustainable Growth warns that utilities operating below cost recovery will almost inevitably face deteriorating infrastructure, while a state-of-the-art review in the International Journal of Water Resources Development finds that charging below the true cost of service is “almost guaranteed” to result in rising non-revenue water (NRW). Further reinforcing this point, a review published in Utilities Policy highlights that NRW levels exceeding 30 per cent are often a red flag for systemic governance failures, rather than merely technical leaks in the system.
Malaysia’s NRW rate averages at a staggering 37 per cent nationwide, exceeding 50 per cent in some northern states, placing it within this risk category. We are in fact recording the second-highest NRW across Southeast Asia, seven times higher than Singapore, as reported by Global Water Intelligence. These failures translate into real consequences: household water cuts, rising costs for businesses and pressure on local industries trying to stay competitive.
The legal balancing act behind water tariffs
Malaysia’s tariff reform isn’t just a financial or technical issue; it is also a question of legal and moral responsibility. The Human Right to Water, recognised under the UN’s General Comment No. 15, obliges governments to keep water both available and affordable. Legal analysis published in The Journal of Water Law stresses that tariff increases must not place low-income communities at risk. At the same time, international water governance principles, from the Dublin Statement (1992) to research published in Water Policy, emphasise cost recovery to ensure long-term sustainability. Malaysia’s consistent mismatch between tariff and treatment cost is out of step with these global standards.
The country also faces structural governance challenges. SPAN, the national water regulator, lacks strong enforcement powers. As The Edge (2025) describes it, SPAN often “monitors without muscle,” limiting its ability to compel states or operators to fix high NRW. Legal scholars writing in the Asia Pacific Journal of Environmental Law argue that Malaysia’s split system, with state control over water resources and federal control over water services, creates blurred accountability and slows reform. This legal fragmentation makes tariff reform harder and delays the investments needed to hit SDG 6 targets.
What Malaysia can do next
If tariff reform is to deliver real change, Malaysia needs a strategy, not just higher water bills. Four steps could make a tangible difference:
1. Give SPAN real enforcement power. Strengthening the Water Services Industry Act (WSIA) could allow SPAN to issue legally binding directives, enforce NRW reduction targets and penalise operators who consistently underperform. This moves Malaysia closer to global regulatory best practices.
2. Build a national water performance fund. A results-based financing model, inspired by examples referenced in Utilities Policy and World Bank benchmarking studies, could bring together government, GLCs and private investors. Funds would only be released when utilities demonstrate actual improvements such as m³ of water saved.
3. Target quick wins in high-loss states. Perlis, Kedah and high-leakage urban zones should be prioritised for District Metered Areas (DMAs), smart
4. Protect low-income households. A subsidised lifeline block of 20 m³/month can safeguard vulnerable consumers, while higher-use households and industries pay rates aligned with the “ability-to-pay” principle widely referenced in water rights literature.
Malaysia’s 2025 tariff reform is an important step towards sustainability. However, numbers from The Star make the issue clear: RM1.54/m³ tariffs cannot support RM1.89/m³ treatment costs. Without bridging this financial gap and without stronger governance, smarter investment and targeted technical action, Malaysia will continue losing RM2 billion in NRW every year. Tariff increases alone won’t solve the crisis. But with transparent governance, empowered regulation and performance-driven financing, Malaysia can finally move closer to achieving SDG 6: Clean Water and Sanitation for All.
*Shalome David, Umadevy Selva Kumaran and Dr Mohd Istajib Mokhtar are from the Department of Science and Technology Studies at the Faculty of Science, Universiti Malaya and they may be reached at ista.ajib@um.edu.my
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
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