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Cities urged to re-think planned water price hikes

(Xinhua)
Updated: 2008-04-03 10:46

The central government emphasized the importance of combating inflation Wednesday as some cities plan to raise water fees.

Tang Tiejun, director of the Pricing Department of the National Development and Reform Commission (NDRC), told the 2008 Strategic Forum on the Urban Water Sector that the government hoped some cities would delay raising water fees amid surging inflation.

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Tang said that cities wishing to hike water charges should consider the consumer price index (CPI), per capita income and general price levels.

Most cities are considering raising utility charges, such as those for electricity and water, to offset rising costs.

Water prices in many countries reflect a basket of costs, such as the actual cost of water, infrastructure, disposal and management costs and sewage charges.

"But in China, water is a public good supplied by the government" and the price covers a smaller variety of costs, said Zhang Kai, an analyst with China Minzu Securities. "Water prices in China are relatively low," said Zhang, which reduces investors' willingness to finance improvements.

In Beijing, for example, water for residential use is priced at 2.80 yuan (40 US cents) per ton, while industrial and commercial users pay 4.10 yuan per ton and the catering sector pays 4.6 yuan.

Some experts admit that water charges will have to rise in the long run but agree with the government's decision to give top priority to curbing inflation at present.

Fu Tao, director of the Water Sector Policy Research Center at Tsinghua University, said that water was a government-managed resource in China, so water facilities would find it hard to raise prices.

The CPI rose 4.8 percent year-on-year in 2007, the highest since 1997 and well above the 3 percent government target. In February, the CPI rose 8.7 percent, the highest monthly surge in the past 11 years.

Premier Wen Jiabao has urged governments at all levels to work to keep the economy from overheating and price rises from persisting.

Tang said that, ultimately, it would be up to the local governments to decide how much to raise water prices, but "the range should be within residents' affordability".