23 October 2018

HK to pay 7% more for Dongjiang water over next three years

Hong Kong has signed a new agreement with Guangdong province for water supply for the next three years, a deal that entails a nearly 7 percent rise in payment compared to the existing supply pact that runs out this year.  

In a document submitted to the Legislative Council on Tuesday, the Development Bureau said the two sides agreed to continue to adopt the “package deal lump sum” approach for the period between 2018 and 2020.

Under this approach, Hong Kong is required to make a fixed annual lump sum payment to the Guangdong side in return for a guaranteed annual water supply up to the ceiling in the agreements to ensure Hong Kong people can enjoy a reliable and flexible supply of water from Dongjiang River.

According to the bureau, Hong Kong will get 820 million cubic meters of water a year as an upper limit, the same as the past few years, from the river throughout during the period, the Hong Kong Economic Journal reports.

In return, the city has to pay a total of HK$14.42 billion (US$1.8 billion), a nearly 7 percent increase compared to the previous deal, regardless of how much water the city actually imports for use.

As the annual increase is set at 0.3 percent, which is lower than that seen in the past two agreements, it means Hong Kong has to pay HK$4.79 million in 2018 based on the estimated payment of HK$4.77 billion this year.

The bureau said the increase is reasonable as it is adjusted according to the prices in both places.

While it claims that the approach can help meet the city’s actual needs even under extreme drought conditions, it is expected that Hong Kong will have to pay a lot of money for a lot of amount of water that will not be used as was seen in the past years.

For example, Hong Kong only imported 629 million cubic meters of water from Guangdong in 2016, meaning it paid as much as HK$1.05 billion for 191 million cubic meters that it did not use.

As such, there has been a suggestion that the government should change the payment method of the water supply deal to pay-per-use, which could help the city save some money.

The bureau said in the document that Guangdong has agreed to review how the Dongjiang River water supply should be charged in the future, including a possible way that combines the “package deal lump sum”, which has been adopted for 10 years, and pay-per-use.

That said, the bureau also cited the Guangdong authorities as saying that they may not able to guarantee Hong Kong adequate water supply under extreme conditions if there is no upper limit set.

The last adjustment in the water tariffs took place more than 20 years ago.

As the payments for Dongjiang River water keep rising, a source told HKEJ that it is possible that the water tariffs charged in Hong Kong could be hiked.

The Water Supplies Department is said to have mulled a 15 percent tariff hike in 2015 as it suffered annual loss of nearly HK$1 billion in recent years, but it eventually decided to stay on hold.

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