New Water Price Regulations Intended to Rationalize Supply

By Tarrant M. Mahony

As part of China¡¦s on-going battle to rationalize the management and operation of its water industry, promote national development and conserve natural resources, the National Development and Reform Commission (NDRC) recently issued the Administration of the Price of Water Supplied by Water Conservancy Projects Procedures (the Procedures), which became effective as of January 1 2004.  The Procedures apply to all water conservancy projects in the PRC.

The Procedures are intended to spur investment in the water industry by allowing prices to reflect actual production costs, and thereby allowing private sector investors to profit from their investments.  This approach moves market reform one step further in China, where water prices have long been well below cost because of significant state subsidization.  It is hoped that more expensive water will also lead in the end to more efficient water use.