Half Price While Supplies Last
By CWR 24 May, 2010
With China raising water tariffs to address growing water scarcity issues, Hong Kong with its subsidised water fees may find itself being priced out of the competition for this increasingly scarce resource.
Raising the cost of water is inevitable if Hong Kong decides to manage its water resources better. But so far, the HKSAR Government hesitates to increase tariffs, largely because of expected resistance from legislators.
Non-profit think tank, Civic Exchange, at a press briefing today, says it is time for officials to disclose the water-related risks Hong Kong faces and what it will take to ensure water security for the whole of the Pearl River Delta (PRD), to which Hong Kong’s socio-economic circumstances remains intricately tied.
Civic Exchange’s water research1 shows:
- When looking at water, Hong Kong must consider not only the Dongjiang (which supplies 70%-80% of the city’s fresh water) but the whole of the Pearl River Basin. The health of the basin affects agriculture, husbandry, power generation and industry in the PRD, an area of economic importance to Hong Kong.
- With regards to the Dongjiang, its water is shared by many under an allocation plan, and with rising demand it is expected that users will need to become much more efficient in use of water.
- China’s national policy is to promote demand management and water tariffs are being raised continuously to show the true value of water and the costs of delivering water services. The price for water in Hong Kong should not remain at current levels2 when mainland cities continue to raise tariffs.
“Hong Kong people need to understand users on the mainland will be paying more and more for water as a result of policy to improve water resource management,” says Christine Loh, CEO of Civic Exchange. Such that when Hong Kong’s current water supply contract3 with the Guangdong government runs out and is renegotiated in 2011, Loh expects that “the amount will likely be higher and that the price further in the future will be higher still.”
Comparing water tariffs of Hong Kong and mainland cities, Hong Kong’s tariffs look high by comparison, but with consumers’ initial 12 m3 subsidised by the government4, Loh says that the tariffs would in fact be roughly on the same level as the mainland. Which would be at odds with Hong Kong’s status as China’s richest city.
Hong Kong’s water supply fees have remained the same since 1995, partially a backlash from the Asian crisis in 1997 and SARS in 2005, but even years later, the prices have not been adjusted to reflect real costs of water services. When compared with other developed countries, Hong Kong charges very little for its water.
For more information contact Civic Exchange
1 Falling Up! Water pricing must meet true costs (Published by CLSA), May 2010; Liquid Assets: Water security and management in the Pearl River Basin (Published by Civic Exchange), December 2009.
2 There is a 4-tier tariff system in HK where the 1st tier of 12 m3 is free, rising to HK$ 4.15, HK$6.45 and HK$9.05 calculated on a four-month basis. Sewage charges are additional, where the first 12 m3 is also free. Current payment is HK$1.57 per m3, rising to HK$2.92 in 2017.
3 Under the current contract that runs from 2009 to 2011, Hong Kong receives an annual guaranteed quantity of 1.1 billion m3 at an annual cost of HK$2.96 billion, HK$3.14 billion, and HK$3.34 billion. These charges represent a cumulative increase of HK$1.96 billion compared with the period 2006-2008. This increase has been attributed to a stronger RMB but also to price inflation.
4The government currently subsidies water use – 17% of domestic accounts pay nothing because the first 12m3 of water is free, and 30% pay only HK$1- HK$125/month.
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