As a state-owned company, PJT I is required to show budget surplus for it to be considered a healthy corporation (at the cost of adequate maintenance). PJT I also promotes non-water service activities (consulting, tourism, river sand mining services) to raise funds. The annual budget has to be approved by the Ministry of Finance, ensuring Central Government oversight over its finances.

PJT I does not collect enough money to cover O&M. The highest amount of O&M costs the PJT I has been able to cover was 60% in 1996. After the economic crisis in 1997, the corporation could only cover 31% of the normal budget because of inflation and because many beneficiaries did not want to pay the tariff. The central government assists with maintenance and rehabilitation of the river basin and irrigation infrastructure through a direct budget where the operator cannot afford to cover O&M, for instance, through a block grant to the Provincial Government. The Central Government provides PJT I with about Rp. 50 million (~ US$5,556) for flood control, but this is not sufficient to cover costs. PJT I’s flood control budget is used as a source of revenue when there is no flood. The Central government also provides funds for infrastructure rehabilitation through central projects, which is considered a public service offering. The policy of Public Service Obligation was started recently, and refers to partial funding by government ministries for public services in accordance with budgetary monies available. As more clearly specified in the new water law, the Ministry of Finance is obligated to provide funds to river basin management agencies for public service and welfare issues. The cost of social benefit should be borne by government, not by beneficiaries.

PJT I operates a resort area along the Selorejo reservoir with the interest of promoting recreation, tourism, and water sports within the basin and rents out its land for agricultural purposes. For developing such non-water sources of income, which comprised 25% of revenues in 2003, PJT I seems to have some level of autonomy as long as they fulfill their larger organizational objectives and make PJT I a profitable corporation.

With respect to resource endowments, industry, hydropower, municipal water suppliers earn far higher revenues than the agricultural sector and pay service fees in exchange for a regular water supply for their operations. It seems to be generally understood among licensed stakeholders that they are taking on disproportionately large costs and subsidizing basin management costs because irrigation farmers might not be able to afford to pay water service fees, or that obtaining fees from them is difficult given monitoring and coordination costs. Farmers make up most of the Brantas basin’s population. According to a survey study prepared by JICA in 1996, land farmed in the Brantas basin tends to be in small parcels of less than 0.50 ha/family, and farmers supplement their on-farm income with off-farm income. Irrigation farmers pay a contribution in the form of paddy as a WUA membership fee, leaving them with few resources to contribute to basin-level O&M service fees.

The revenue regulations issued after the enactment of Law No 25 on Fiscal Equalization in 1999 call for service fees (e.g. water service tariffs) collected by a national public corporation within the jurisdiction of a provincial and local government to be shared with the said governments (`retribusi’). This may or may not affect the revenue collected by PJT I and the net balance available for transfer to the Ministry of Finance.

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