The Diet on Thursday enacted a controversial law allowing private companies to run water supply services as many public suppliers fall into the red and struggle to update aging facilities amid a shrinking population.

But critics are worried that the revised Water Supply Act, which paves the way for local governments to sell the rights to manage water services for as long as 20 years, will effectively lead to privatization, a move that could lead to higher water bills and prove unsuitable for coordinating reliable responses in times of disaster.

According to the Health, Labor and Welfare Ministry, one-third of municipal governments managing water supply services were unable to cover operating costs with water bills, and the situation is expected to worsen further due to the declining population.