Scrap policy that gives free water to Hong Kong households, say experts

Experts say policy of giving each household 36,000 litres without charge costs too much and encourages waste - but admit change will be tough

PUBLISHED : Friday, 21 March, 2014, 11:53am
UPDATED : Saturday, 22 March, 2014, 4:49am

A decades-old policy that gives each household 36,000 litres of fresh water for free every year should be reviewed, experts advised ahead of World Water Day today.

Water fees have been frozen for nearly 20 years and the freshwater pricing structure requires a major overhaul to better reflect costs and encourage conservation, the group of academics and government advisers say.

But rising populism was likely to prove an obstacle, the experts said. They suggested price increases could first target businesses and heavy domestic users.

The issue came to the fore last month, when Financial Secretary John Tsang Chun-wah said in his budget speech that a review of water fees was necessary.

Water tariffs have remained unchanged since 1995, although the cost of supplying it rose 43 per cent between 1998 and 2012. The price of water imported from Dongjiang , the river in Guangdong from which most of Hong Kong's potable water is drawn, increased by 63 per cent during the same period.

Despite rising costs, the government supplies the first 36,000 litres of water to each household for free - a practice that has gone on for 43 years.

The policy cost the city about 77 million cubic metres of water in 2012, some 9 per cent of total consumption, according to South China Morning Post estimates. Water officials put the cumulative price tag for free water at about HK$11 billion since 1998.

Public utilities expert Dr Lam Pun-lee believes the policy should be scrapped. "Water is such a precious resource, it should not be given free as it could lead to wastage," he said.

Lam noted that the Social Welfare Department also offers low-income families monthly cash allowances to pay for their water. Under the current system, a low-income household of four people gets HK$50.80 - enough to pay for 12,000 litres of water - per month, as well as the allocation they get for free.

Professor Carlos Lo Wing-hung, a Polytechnic University public policy expert, said the free-water policy was not ideal but abolition would be impractical.

A more realistic approach, he said, was to raise tariffs for heavy users, such as businesses. "There is no reason for taxpayers to subsidise businesses for their water to such a heavy extent," he said.

Businesses pay the government HK$4.58 per unit of fresh water regardless of usage. The rate has been fixed since 1995, although the cost of supplying the same amount of water could reach more than HK$8 per unit, based on the costs of the Water Supply Department, including buying imported water.

But Lo was pessimistic about the prospect of raising tariff levels, given the weakness of the government and a public increasingly inclined towards dissent and protest.

Dongjiang water resources advisory committee member Dr Man Chi-sum said the free-water policy should be kept as it could encourage users to save water.

Rather than abolishing the policy, he suggested adjusting the four-tiered progressive tariff structure - under which a unit of fresh water beyond the initial free allocation costs households between HK$4.16 and HK$9 - to further penalise heavy domestic users. The public pays an average of HK$8.70 per unit for water beyond the free allocation.

"Scrapping the policy is highly unlikely under the current administration," Man said. "But there is room to adjust the structure to encourage water saving."

The policy of supplying all households with free fresh water was introduced in 1971. The amount - 36,000 litres a year - was considered the basic essential level for an average home.

Free-water policies are not common overseas.

A Water Supplies Department spokesman said the tariff review would take into account affordability, consumer wishes, the economy, and lawmakers' views.