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June 14, 2013

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Shanghai plans 30% water price rise

Shanghai is planning to increase water rates by around 30 percent.

Currently, residents pay 2.8 yuan (46 US cents) per cubic meter of tap water and it is proposed the rate be raised to 3.65 yuan, the Shanghai Development and Reform Commission said yesterday.

"This is not a price adjustment meant to make money," said Chen Yuanming, vice director of the Shanghai Water Authority.

The commission said water tariffs will be set based on costs, regardless of the financial performance of the utilities. That would mean an increase larger than the proposed 0.85 yuan rise for residents. To bridge the gap, the government said it decided to impose steeper increases for industrial and commercial users.

While Shanghai continues to spend heavily to improve water supply and quality, "we have to ease water utilities' financial strains," Chen said.

Shanghai's water suppliers reported a net loss of 268 million yuan last year, or 0.15 yuan per cubic meter of water, while drainage companies posted a loss of 426 million yuan, or 0.36 yuan per cubic meter, according to audited data released yesterday.

The companies also face an additional cost of 0.54 yuan and 0.14 yuan per cubic meter respectively this year because of higher raw water prices, operation costs, depreciation of fixed assets and rising interest costs.

The commission also said it may introduce a progressive tariff system for water - like that used by power utilities - with higher rates for excessive use.

That system would charge 3.5 yuan for the first 240 cubic meters of water in a household in a year. That would cover 90 percent of city households based on last year's data, the commission said.

The price would rise to 4.1 yuan for use in excess of 240 cubic meters and to 4.95 yuan beyond 300 cubic meters. On average, the progressive system would translate into an increase of 0.85 yuan, the same as the single-price system.

Though the progressive plan will encourage conservation, it might be difficult to implement as it would require upgrading meters. Some households are still using shared meters.

Both plans will be discussed at a public hearing on June 28, which could pave way for the city's first water price increase since November 2010.

The latest price adjustment would mainly affect downtown residents supplied by the city's three main water utilities. Suburban authorities may announce their own price adjustment plans later.

As with fuel, power and natural gas, water is another commodity for which the Chinese government is pursuing price reform to better reflect scarcity of resources and to encourage conservation.


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