164
7 Water Pricing
sludge disposal according to the polluter pay principle; the tariff belongs to governmental non-tax income and fully handed over to local treasure. It stipulates that the
collection rate should be formulated based on principles of covering wastewater treatment facility operational and sludge disposal costs and generating profit. The revenue
and local governmental subsidy are paid to urban drainage and wastewater treatment
service providers through governmental service buying (Ministry of Financing et al.
2014).
In January 2015, according to the principles of “polluter pay, fair affording,
compensating cost, reasonable profit,” the NDRC and other bodies stipulated that
wastewater tariffs be regulated according to local pollution control requirements
and social affordability. It was further required that before the end of 2016, the
tariff should be increased to no less than 0.95 RMB/m
3 for residential use and 1.4
RMB/m
3 for non-residential use in cities, along with 0.85 RMB/m
3 for residential
use and 1.2 RMB/m
3 for non-residential use in towns. Those cities achieving the
minimum standard but not compensating costs and generating profit were permitted
to increase the tariff further. All cities and key towns were required to be collecting
tariffs by 2015. It was also stipulated that the differential tariff could be formulated
for standard-exceeding discharge and pollutant types (NDRC et al. 2015).
In 2018, to promote green development through economic incentives, the state
accelerated the development of the wastewater pricing mechanism to cover wastewater treatment and sludge disposal costs and provide rational benefits by introducing
a dynamic regulation mechanism, differentiating a levy mechanism for enterprise,
devising a pricing mechanism compatible with wastewater treatment standards and
exploring the possibility of a rural wastewater treatment charging system (NDRC
2018).
Due to increasing pressure to regulate wastewater tariffs, the tariff rate has risen
rapidly in the last 20 years, but not by a level sufficient to cover costs. In Beijing, for
example, the wastewater tariff was 0.10 RMB/m
3 when collection began in 1997,
increasing to 0.30 RMB/m
3 in 1999, 0.50 RMB/m
3 in 2002, 0.90 RMB/m
3 in 2009,
and 1.36 RMB/m
3 after 2014.
Based on the lessons and experiences acquired from the urban water supply tariff,
the original purpose for levying a wastewater tariff was simple: to cover costs and
generate sufficient profits to support wastewater sector development. However, nearly
20 years of regulation proves that it is highly difficult to recover costs for wastewater
treatment in China. Thus, the government has returned to using administrative charges
and providing subsidies. It is especially interesting to note that the proper pricing
methods could not achieve the expected results. Therefore, the problem in the near
future will be how to reform service pricing management systems, such as cost
auditing and public hearing.
For more than 20 years, the nature of the tariff and cost recovery have been the
key issues in wastewater tariff formulation.
Nature of the tariff. This refers to the service charge or administrative charge of
the tariff. Unlike supply tariffs, the wastewater tariff was almost always defined as a
service charge in theory and policy direction, but implemented as an administrative
7 Water Pricing
sludge disposal according to the polluter pay principle; the tariff belongs to governmental non-tax income and fully handed over to local treasure. It stipulates that the
collection rate should be formulated based on principles of covering wastewater treatment facility operational and sludge disposal costs and generating profit. The revenue
and local governmental subsidy are paid to urban drainage and wastewater treatment
service providers through governmental service buying (Ministry of Financing et al.
2014).
In January 2015, according to the principles of “polluter pay, fair affording,
compensating cost, reasonable profit,” the NDRC and other bodies stipulated that
wastewater tariffs be regulated according to local pollution control requirements
and social affordability. It was further required that before the end of 2016, the
tariff should be increased to no less than 0.95 RMB/m
3 for residential use and 1.4
RMB/m
3 for non-residential use in cities, along with 0.85 RMB/m
3 for residential
use and 1.2 RMB/m
3 for non-residential use in towns. Those cities achieving the
minimum standard but not compensating costs and generating profit were permitted
to increase the tariff further. All cities and key towns were required to be collecting
tariffs by 2015. It was also stipulated that the differential tariff could be formulated
for standard-exceeding discharge and pollutant types (NDRC et al. 2015).
In 2018, to promote green development through economic incentives, the state
accelerated the development of the wastewater pricing mechanism to cover wastewater treatment and sludge disposal costs and provide rational benefits by introducing
a dynamic regulation mechanism, differentiating a levy mechanism for enterprise,
devising a pricing mechanism compatible with wastewater treatment standards and
exploring the possibility of a rural wastewater treatment charging system (NDRC
2018).
Due to increasing pressure to regulate wastewater tariffs, the tariff rate has risen
rapidly in the last 20 years, but not by a level sufficient to cover costs. In Beijing, for
example, the wastewater tariff was 0.10 RMB/m
3 when collection began in 1997,
increasing to 0.30 RMB/m
3 in 1999, 0.50 RMB/m
3 in 2002, 0.90 RMB/m
3 in 2009,
and 1.36 RMB/m
3 after 2014.
Based on the lessons and experiences acquired from the urban water supply tariff,
the original purpose for levying a wastewater tariff was simple: to cover costs and
generate sufficient profits to support wastewater sector development. However, nearly
20 years of regulation proves that it is highly difficult to recover costs for wastewater
treatment in China. Thus, the government has returned to using administrative charges
and providing subsidies. It is especially interesting to note that the proper pricing
methods could not achieve the expected results. Therefore, the problem in the near
future will be how to reform service pricing management systems, such as cost
auditing and public hearing.
For more than 20 years, the nature of the tariff and cost recovery have been the
key issues in wastewater tariff formulation.
Nature of the tariff. This refers to the service charge or administrative charge of
the tariff. Unlike supply tariffs, the wastewater tariff was almost always defined as a
service charge in theory and policy direction, but implemented as an administrative