Guangdong pact to see supply cost up 18.6pc The city will have to pay almost HK$2 billion more for guaranteed water imports from Guangdong's Dongjiang for the next three years as inflation and the yuan drive up costs, the Development Bureau has said. The change will not result in higher tariffs, which the government has vowed to freeze for the next two years to help residents combat inflation. But critics say existing tariffs are too low to encourage users to save water, and makes investment on water efficiency and developing new sources unattractive. Under a new three-year deal just reached with Guangdong, import prices will rise 18.6 per cent next year, and a further 6.3 per cent each year in 2010 and 2011. For this three-year period, Hong Kong must pay a lump sum of HK$9.4 billion to import water capped annually at 1.1 billion cubic metres. The amount is HK$1.96 billion more than the previous three-year agreement. The increase was attributed to the stronger yuan, which rose 14 per cent against the Hong Kong dollar in the past three years, and a 3 per cent annual inflation in the region, the bureau said yesterday. The Water Supplies Department said the new deal remained a flexible supply contract under which the city, depending on weather conditions, would draw from the Dongjiang only the amount it needed. The deal allowed the city to reserve the right to take up to the maximum volume in times of severe drought. The Dongjiang accounts for up to 80 per cent of Hong Kong's supplies, but its flow is said to be getting unstable as development in other Pearl River Delta cities booms and rainfall fluctuates. To cope with rising demands, these cities raised their water charges by up to 30 per cent in the past three years. Hong Kong used 950 million cubic metres last year, with 715 million imported from the Dongjiang and the rest from local catchments. Betty Ho Siu-fong, of the advisory committee on the quality of water supplies, said the government should consider increasing charges 'a bit' to encourage saving of water. Damien Ku Chi-chung, former assistant director of water supplies, also echoed the view that without financial deterrents, no one would care about saving water. 'It is ridiculous that while water is regarded as a precious resource, it costs us just several dollars for 1,000 litres of tap water. But at the same time, one litre of bottled water costs just the same.' The first 12 cubic metres for domestic households are free and subsequent charges range from HK$4.10 to HK$9 per cubic metre. The structure has been in place since 1995. Mr Ku said current tariffs had failed to spur people to diversify supplies through water recycling, collection of rainwater and use of grey water. The department said it would announce a water management plan to ensure stable supplies and conserve resources. One initiative being considered was a water efficiency labelling scheme for appliances.