Roadmap for increasing water charges

Published: 25/03/2009 05:00



Many provinces and cities have pushed up prices of tap water. Others will also raise water charges in the near future. Chairman of the Vietnam Water Supply and Drainage Association, Nguyen Ton, talked about the issue.

Song Da Water Plant.

A lot of localities, for instance Nam Dinh, Quang Ninh in the north, Binh Duong, Ba Ria-Vung Tau and Long An in the south, Binh Dinh and Quang Tri in the central region, have raised water charges. Why?

Some newspapers reported that the price for tap water shot up because of the increase of electricity charges, which accounts for around one-third of the production cost of tap water. It is partly true but it is a process for the increase of water prices: prior to 2000, water producers were state-owned companies and they supplied water as a public service.

Under the central resolution No. 3, these companies became independently financial businesses. The government also released an instruction which said that the price of tap water must be calculated on real inputs.

Based on these regulations, the Ministries of Finance and Construction issued a circular of methods to calculate tap water prices. Accordingly, provincial People’s Committees have the right to set water prices.

However, the circular said that “water prices need to be suitable to consumers’ payment ability” but it didn’t explain what it meant by “suitable”. Some provinces, thus, fixed water prices as equal to production costs, which was not enough to expand water production. Recently, some localities began to raise water charges to levels that are sufficient to cover inputs and to expand production.

In your opinion, what level is suitable to consumers’ payment ability?

The World Bank and the Asian Development Bank recommend that if the expenditures for safe water exceed 3% of people’s total real income, the water charge exceeds consumer’s payment ability.

According to the General Statistics Office, average capita income at cities is around VND1.1 million/person/month so it is reasonable if the water charge is less than VND33,000/person/month.

The government’s regulation said that urban citizens can use up to 4cu.m of clean water/person/month (133l/day) but according to our survey in four years, from 2004 to 2007, the per capita use of clean water was 97l/day.

It means that at the current water charge, if a person uses clean water at the highest level or 4cu.m x VND2,700 = VND12,8000/month, equivalent to just one-third of the WB and ADB’s recommendation.

Why were water charges not increased in 2008, but in 2009?

In 2007, the government issued Decree 117 about the increase of water prices. Provinces began considering the increase in early 2008 when inflation occurred.

The government’s meeting in March 2008 pointed out groups of solutions to combat inflation. The most important solution was stabilising the prices of essential goods, including water. So water charges were not raised at that time.

We asked the government to extend debt payment for water supply companies in 2008 so they didn’t need to raise water charges.

In late 2008, the ministries of finance, construction, agriculture and rural development sat together to compile a new circular to replace the above-mentioned circular. If nothing changes, this circular will be issued in late March. Accordingly, the prices for clean water will be decided based on the market mechanism.

Do Minh

Related News:

Bid to increase water prices questioned

Electricity cost increases push up city water prices

Clean water price raised, burdening poor people

MOC wants water price increase, MOF doesn’t

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