15.4 Key Sectoral Reforms
325
production should be subsidized as it is in many other parts of the world. And yet
China is short of water resources and agriculture is the largest water user, representing
more than 60% of total water use, so in theory water should be saved and charged in
a manner that reflects its scarcity and the costs of provision.
Mixed with institutional reform, pricing for agricultural water use has undergone
a number of changes since 1990.
In 1995, the Notice on Further Strengthening Irrigation Infrastructure Construction requested to improve agricultural water tariff formulation, collection, and use
according to 1985 Water Tariff Formulation, Collection, and Management Methods
for Hydraulic Engineering, in order to guarantee the regular operation of infrastructure. Under the original proposal, the tariff should be based on water supply
costs. Therefore, agricultural water tariffs for grain production should be formulated according to water supply costs, while those for cash crops could be higher; at
the same time, water supply costs for agriculture should not include the fixed asset
depreciation from farmers’ labor input. The intention was to collect more tariffs from
agricultural water supply to provide more revenues for infrastructure operation and
management, because public resources were not so plentiful at that time.
The 1997 Water Sector Industrialization Policy followed in the same voice. Article
20 outlined a rational pricing policy for water to promote the industrialization of
the water sector. Water supply tariffs for new projects should be formulated on the
basis of covering expenditures and costs, payment of taxes, repayment of loans, and
reasonable profits. Water tariffs for other projects should be regulated with a view to
cost-recovery and reasonable profits within three years, adjusted over time according
to water supply cost changes. The document target was not achieved, however.
After 2000, with institutional reform and cancelation of rural taxes and fees,
the state shifted to subsidize agricultural water supply. In 2002, Opinions on Some
Problems of Reform Agricultural Water Use Price by NDRC focused on the farmer’s
ability to pay and pointed out that agricultural water pricing reform must be implemented in tandem with improvements to irrigation canal systems and metering facilities, which could reduce water waste. The document requested an improvement in
agricultural water supply subsidy mechanisms, the cancelation of irrational costs not
related to water (such as family planning charges), and a restriction on water supply
costs by reducing management staffing.
In 2003, Management Methods for Water Supply Tariff from Hydraulic Engineering by NDRC and the MWR defined that prices for agricultural water use
should be formulated in order to recover water supply costs and expenditure, but
not accounting for profits and taxes.
In 2004, Notice of Promoting Water Pricing Reform to Promote Water Saving and
Water Resources Protection, advised incorporating all sections of agricultural water
supply tariffs into the scope of governmental pricing (which would be regulated by
the governments), and applying end water tariff systems directly to farmers, as well
as reducing management costs, and implementing volumetric charges if possible.
After the issuance of the document, with the increase of public financial resources
and rise in subsidies to farmers and agriculture, the agricultural water price policy
did not change.
325
production should be subsidized as it is in many other parts of the world. And yet
China is short of water resources and agriculture is the largest water user, representing
more than 60% of total water use, so in theory water should be saved and charged in
a manner that reflects its scarcity and the costs of provision.
Mixed with institutional reform, pricing for agricultural water use has undergone
a number of changes since 1990.
In 1995, the Notice on Further Strengthening Irrigation Infrastructure Construction requested to improve agricultural water tariff formulation, collection, and use
according to 1985 Water Tariff Formulation, Collection, and Management Methods
for Hydraulic Engineering, in order to guarantee the regular operation of infrastructure. Under the original proposal, the tariff should be based on water supply
costs. Therefore, agricultural water tariffs for grain production should be formulated according to water supply costs, while those for cash crops could be higher; at
the same time, water supply costs for agriculture should not include the fixed asset
depreciation from farmers’ labor input. The intention was to collect more tariffs from
agricultural water supply to provide more revenues for infrastructure operation and
management, because public resources were not so plentiful at that time.
The 1997 Water Sector Industrialization Policy followed in the same voice. Article
20 outlined a rational pricing policy for water to promote the industrialization of
the water sector. Water supply tariffs for new projects should be formulated on the
basis of covering expenditures and costs, payment of taxes, repayment of loans, and
reasonable profits. Water tariffs for other projects should be regulated with a view to
cost-recovery and reasonable profits within three years, adjusted over time according
to water supply cost changes. The document target was not achieved, however.
After 2000, with institutional reform and cancelation of rural taxes and fees,
the state shifted to subsidize agricultural water supply. In 2002, Opinions on Some
Problems of Reform Agricultural Water Use Price by NDRC focused on the farmer’s
ability to pay and pointed out that agricultural water pricing reform must be implemented in tandem with improvements to irrigation canal systems and metering facilities, which could reduce water waste. The document requested an improvement in
agricultural water supply subsidy mechanisms, the cancelation of irrational costs not
related to water (such as family planning charges), and a restriction on water supply
costs by reducing management staffing.
In 2003, Management Methods for Water Supply Tariff from Hydraulic Engineering by NDRC and the MWR defined that prices for agricultural water use
should be formulated in order to recover water supply costs and expenditure, but
not accounting for profits and taxes.
In 2004, Notice of Promoting Water Pricing Reform to Promote Water Saving and
Water Resources Protection, advised incorporating all sections of agricultural water
supply tariffs into the scope of governmental pricing (which would be regulated by
the governments), and applying end water tariff systems directly to farmers, as well
as reducing management costs, and implementing volumetric charges if possible.
After the issuance of the document, with the increase of public financial resources
and rise in subsidies to farmers and agriculture, the agricultural water price policy
did not change.