PRICING OF IRRIGATION WATER IN CHINA. Zhou Yaozhou and Wei Bingcai

Transcription

1 PRICING OF IRRIGATION WATER IN CHINA Zhou Yaozhou and Wei Bingcai

2 INTRODUCTION Paper Outline This paper gives brief introduction to China s water resources including both quantity and quality of surface water and ground water. It also describes the irrigation development in China. It provides a review of recent reforms in the water resources sector in China in the field of legal and institutional aspect in China, particularly relating to irrigation water pricing. The paper begins with a brief overview of past policy in the irrigation sector, and measures and reforms related to irrigation water pricing in recent years. Chapter 2 provides a description of physical aspects in water resources and the derived demand for irrigation water. Chapter 3 focuses on the main characteristics of the 1988 water law of China and modification will be possibly made in the near future concerning water rights and management. Chapter 4 provides an overview of existing institutions in the sector, and analysis possible reforms in institutional restructuring at macro and micro level. Chapter 5 presents political aspects such as the impact of reforms on major stakeholders. Chapter 6 examines current water pricing procedures, future pricing reforms and its economic indication. Past Policies During the first 30 years after the establishment of the People s Republic of China, the Chinese government adopted highly centralized planned economy system. The water sector implemented the methodology of government invests, farmers input labor and the society uses free of charge. Water resources development did not pay any attention to economic benefit and project operation did not calculate costs at all. Thus the whole sector ate from the same big pot and the society drank water from the same big pot too. Without adequate operation and maintenance, aging and lack of repair of water projects became more and more serious, benefits began to decrease. Since China adopted the policy of reform and opening-up to the outside world, water resources development has turned a page. The financial channel was broadened, in particular, loans from the World Bank and the Asian Development Bank were introduced; the legal system with the focus on Water Law was established; water pricing system was initially set up; the operation and maintenance of water projects were strengthened; the administrative system was also reformed and improved continuously. As for irrigation water, there was no uniform charging system in the whole country during the first 30 years after new China was set up. But in many places, methods of charging irrigation water were introduced with low standards. Only the expenditure of irrigation district managerial personnel was covered by the water charge. The government revenue subsidized the operation and maintenance of irrigation districts. In 1965, the State Council issued the first Water Tariff Review, Calculation, Collection and Management Method of Water Projects and tried its implementation in the whole country. But due to various reasons, the implementation in different places varied and the charging standards were very low, so the water charge could not meet the normal operation of water projects. In particular, rural water supply was actually free for a long 270

3 time. In order to change this situation, the State Council renewed the Water Tariff Review, Calculation, Collection and Management Method of Water Projects (Water Tariff Method) in 1985, which stipulated that charge of agricultural water supply should be defined based on cost, water charge for grain production should cover the water supply cost and water charge for cash crops should not only cover the cost but also include minor profits. The Method also stipulated that the provincial (municipal) government could formulate its implementation regulations based on the actual situation. The regulations generally defined the pricing standards, water charge collecting method and management requirement of different types of water use supplied by different water projects, such as reservoir, irrigation district and pumping station, etc. in the respective region. Although since 1985, water pricing standards have increased year by year, the present water charge for agriculture is on the whole still relevantly low and can not meet the supply cost. According to statistics, the national average water charge for agriculture is yuan/m 3. But the national average water supply cost is yuan/m 3, which means that the agricultural water charge is only 36% of the supply cost. According to 1998 statistics, the agricultural irrigation water per hectare is 7320 m 3 with yuan per cubic meter. So the water charge for irrigation per hectare is yuan while the cost for grain production per hectare is 3500 yuan. So water charge is only 5.4% of the total production cost. In recent years, there has been strong reform of water pricing of water projects and obvious results have been obtained. However, the price is still low, especially the water price for agriculture. In most places, water supply cost has not been met. So improving water pricing system is not only an important task for the further development of water resources, but also the requirement of water sector to adapt to the market economy and sustainable development. PHYSICAL ASPECTS Water Supply The mean annual runoff of rivers in China is billion m 3 and the annual shallow ground water is billion m 3. If the overlapping calculation is deducted, the total water resources in China is billion m 3. As the main source of water resources, river runoff accounts for 94.4% of the national total water resources. The annual precipitation is billion m 3, 45% of which is converted into surface and ground water and the rest 55% evaporates. With respect to the distribution of water resources in China, the north lacks water while the south has relevant abundant water resources. The Yangtze River basin and regions south to it have 36.5% of the national territory and 80.9% of the national water resources. The area of the northwest occupies 1/3 of the national total, but its water resources is only 4.6% of the national total. Rainfall Located in the eastern part of Asia, China has a total territory of 9.6 million km 2, out of which mountain accounts for 33%, plateau 26%, hilly land 10%, basin 19% and plain 12%. The topography is complicated with the land descending from the west to the east. Most parts of the 271

4 country are located in temperate and sub-tropical climate zones. The national perennial average precipitation is billion m 3, which is equal to 648 mm precipitation in depth. The rainfall decreases gradually from the coast in the southeast to the continent in the northwest. The isohyetal line of 400mm precipitation crosses China from the northeast to the southwest. According to the different precipitation, China can be divided into five regions as shown in Table 1 below: Table 1: Distribution of Precipitation in China Types Precipitation Abundant rainfall of Annual Precipita-tion (mm) Drought index ( annual evaporation/annual precipitation) Region >1600 <0.5 Coastal areas in the southeast and south, west Yunnan, southeast Tibet and mid Taiwan Humid South to the Qing Mountain and Huai River, the middle and downstream of the Yangtze River, Yunnan, Guizhou and Sichuan, most parts of Guangxi Semi-humid The Huang-Huai-Hai Plain, Shaanxi, Shanxi, most parts of the northeast, northwest Sichuan, east Tibet Semi-arid Western part of the northeast, southern part of Inner Mongolia and Ningxia, eastern part of Gansu and Qinghai, west and north Xinjiang Arid <200 >7 Western part of Inner Mongolia and Souce: Mme. Qian Zhengying, Water Resources in China) Gansu, Chaidamu Basin in Qinghai, Tarim and Zhunge? Basins in Xinjiang, Tang region in Tibet Influenced by continental monsoon, China has the most rainfall in summer. The consecutive 4 months with the most rainfall in a year are June to September in the north and April to July or May to August in the south, the precipitation of which accounts for 80% and 60% of the annual precipitation respectively. The precipitation varies greatly from year to year and often several consecutive years have abundant rainfall followed by another several consecutive years with 272

5 water shortage. Surface Water The river runoff in China lies on precipitation as its direct supplement source. The mean annual river runoff in China is billion m 3, which is equal to 284mm runoff in depth. The sources for river runoff are: surface runoff caused directly by rainfall accounts for 71% of the total river runoff; the rainfall entering into the ground aquifer and then coming into the river during the dry season accounts for 27%; the precipitation continuously adding to mountain ice and snow and then melted into water accounts for 2%. Like the distribution of precipitation, the mean annual river runoff depth also decreases gradually from the southeast to the northwest. The annual runoff depth in the southeast is as high as 1800mm while in the northwest is below 50 mm, and in between there are large areas without runoff. The regional difference of runoff depth is even greater than precipitation. The surface water resources are shown in Table 2 below: Table 2: Water Resources in China Name of river basin Rivers in the northwest Hai and Luan River basin Yellow River basin Huai River basin and Shandong Peninsula Yangtze River basin Pearl River and rivers in South China Catchment area( 10,000 Annual precipitation Surface water resources(10 Ground water resources(10 km 2 ) (100 million 0 million m 3 ) 0 million m 3 ) m 3 ) Total water resources (100 million m 3 ) 273

6 Rivers in the southeast Rivers in the southwest Inland rivers National total Source: Brief History of irrigation and drainage in New China Ground Water Most of the runoff caused by precipitation enters into the river while the rest goes under the ground to form ground water. The formation of ground water is influenced not only by such natural and geographical conditions as climate, hydrology and topography, but also by the geological formation, ground layer and nature of rock. So there are great differences in recharge, runoff, storage and discharge of ground water in different regions. The annual average ground water resources in China is around billion m 3, including billion m 3 in the hilly areas and billion m 3 in the plain areas. But the overlapping calculation of 34.8 billion m 3 should be deducted. In a general sense, the regional average ground recharge decrease gradually from the southeast to the northwest, which is similar to the variation of annual precipitation and annual river runoff in depth. Influenced by geological conditions, in areas with rich precipitation, such as the Hainan island, Guangdong and Guangxi in the Pearl River basin, Dongting Lake system, Yunnan, Wujiang River basin, Chengdu Plain, middle reaches of the Yangtze River and the southeastern coastal areas, especially in the areas with developed karst geography, the annual average ground recharge is the highest, around 200,000 to 250,000 m 3 /km 2. In the Pearl River basin, it can reach 300,000 to 500,000 m 3 /km 2. While in the Yellow River, Huai River and Hai River region, it is 100,000 to 150,000 m 3 /km 2, less than 50,000 m 3 /km 2 in the Hesong River basin and upper and middle reaches of the Yellow River, less than 10,000 m 3 /km 2 in the inland river basins and Loess Plateau. The ground water resources in China is shown in Table 2 listed above. Water Quality The water quality of major rivers in China is shown in Table 3. In Northeast China, the rapid urbanization and industrialization have resulted in serious water pollution. For the Hai River, Yellow River and Huai River, the reduced river runoff and self-cleaning ability have made the impact of urbanization on water quality more obvious. Comparatively speaking, the rivers in the south have large runoff and strong self-cleaning ability, so water quality is much better. Although water quality has been improved in the 1990s, the water pollution of rivers in the north, eutrophication of major lakes and degradation of urban ground water quality are still main problems. 274

7 Table 3: Category of Surface Water Quality River basin Average runoff (100 million m 3 ) Proportion of river distance( %) Category I and II Category III Category IV, V & above Song-Liao River Hai-Luan River Huai River Yellow River Yangtze River Pearl River Rivers in the southeast Rivers in the 5850 southwest Inland rivers National total ( Note: Category I, II and III: Human beings can have direct contact with it and it can serve as raw water for drinking water; Category IV : Limited for industrial use and amusement use except swimming; Category V: Only for irrigation.) ( Source: China Environment Yearbook 1997) The main sources for water pollution in China are industrial and domestic waste water discharge, fertilizer, pesticide, the erosion of organic fertilizer and spread of solid waste. According to statistics, 80% of the domestic waste water is released into the water body without proper treatment. In 1997, the total waste water discharge was 41.6 billion tons, including 18.8 billion tons of industrial waste water and 18.9 billion tons of domestic waste water. The ground water pollution is also serious. Among 118 cities in China, 64% of which have serious ground water pollution and 33% have minor ground water pollution. Out of the total billion m 3 ground water resources in the Hai River basin, billion m 3 have been polluted, which is 62.3% of the total. The water quality of more than 2/3 of the 2015 ground water wells monitored do not meet the standards of drinking water. Irrigation Water Demand According to different irrigation and drainage requirement of crops in different regions, the whole country can also be divided into three zones, namely regular irrigation zone with prenerial average precipitation below 400mm, unstable irrigation zone with precipitation between 400mm and 1000mm and supplementary irrigation zone with precipitation above 1000mm. The feature of precipitation and different irrigation requirement of the three zones are shown in Table 4 and

8 Table 4: The characteristics of precipitation for three irrigation zones Irriga-tion zone Perennial irrigation zone Unsteady irrigation zone Supplement ary irrigation zone Regions Location of rainfall station Northwest inland China Annual precipitation (mm) Precipitation in diffirent periods (mm) June to Sept. Mar to May Jiuquan Middle reaches of Ynchuan Yellow River Huang-Huai-Hai Plain Dezhou Huaiyang Northeast China Harbin Shengyang Middle and lower Yichang reaches of Yangtse River Pearl River and Min River Guangzhou Partial Southwest Yibin China (Source: Qian Zhengying, Water Resources in China) Oct to Feb. Table 5: The irrigation requirements of the different irrigation zones (mm/year) Irrigation zone Region Crops Dry year Wet year Total crop Irrigation Irrigation Total Irrigation Irrig. demand Requirem. index demand requirem. Index Perennial Northwest Spring irrigation China inland wheat zone Corn Cotton Unsteady Huanghuai-hai Paddy irrigation Winter zone Plain wheat Corn Cotton North-west Paddy China Spring wheat Corn Supplementa Middle and Early ry irrigation Lower paddy zone reaches of Late Yangtse River paddy Winter wheat Cotton

9 Pearl R. & Min R. and Partial Southwest China Early paddy Late paddy Winter wheat (Source: Qian Zhengying, Water Resources in China) Irrigation water demand in the whole country is shown in Table 6. Table 6: Forecast of Total Irrigation Water Demand Year National Song-Liao River Hai-Luan River Huai River Yellow River Yangtze River Pearl River Rivers in southeast Rivers in southwest Inland rivers (Source: Shen Zhengrong, Strategic Study on Agricultural Water Crisis in China) Distribution of Farmland China is a large agricultural country with over 100 million hectares of arable land, which includes 53 million hectares of effective irrigation land. According to the State Statistics Bureau, the cultivated land in China is million hectares, which is 9.89% of the national territory. By 1996, the irrigated land had reached 54.7 million ha, including 51.2 million ha farmland, 2.3 million ha orchard and forestry, 0.8 million ha pastry and 0.5 million ha other forms of irrigated land. The cultivated land area and effective irrigation area are shown in Table 7. Table 7: Cultivated Land Area and effective Irrigation Area 277

10 River basin Area( 1000 Km2 Cultivated land( Irrigated area Irrigation water ) million ha) (million ha) (100 million m3 ) Rivers in northeast Hai-Luan River Huai River Yellow River Yangtze River Pearl River Rivers in southeast Rivers in southwest Inland rivers National total ( Source: Brief History of Irrigation and Drainage in New China) The Total potential irrigated land in China is 60 to million ha. But due to water limitation, the present effective irrigated land is only million ha and actual irrigated land is 40 million ha. According to the requirement of grain production, 6.67 million ha of effective irrigation land should be added by the year 2015, most of which will be in the northeast, southwest and northwest. The newly increased irrigation area will mainly be obtained through agricultural water-saving. The distribution of optimal effective irrigation area is shown in Table 8 below. Table 8 Distribution of Potential Effective Irrigation Area (1,000 ha) Region The potential Irrigation area Irrigation area The proportion maximum in 1996 to be of increase in irrigation area increased since 1996 different regions National total Huang-Huai-Hai Region, Middle reach of the Yellow River, inland areas in the northwest 278

11 Middle reach of the Yantze River, Pearl and Ming River basin, the southwest Three provinces in the northeast (Source: Shen Zhengrong, Strategic Study on Agricultural Water Crisis in China) Crop patterns China is a country with varieties of crops thanks to the different climate conditions. In the meantime, China is also the country with most rotation and repeat cropping in the world and the national average rotation index is over 1.6. The crops have very distinctive regional characteristics. Corn and bean are concentrated in the northeast where the non-frost period is short and there is usually one harvest a year. The North China is the main production base for such dry-land crops as wheat, corn, edible oil and cotton and there are two harvests a year or three harvests in two years. Rice in the main crop in the middle and downstream of the Yangtze River and regions even south and there are two or three harvests a year. Since the northwest is dry and lacks rain, the main crops are spring wheat, corn and cereal and there is mostly one harvest a year. According to statistics, the total area for grain production in 1996 was million hectares and the total grain yield was million tons. The total area for cotton production was million hectares and the total yield was million tons. The total area for oil production was million hectares and the total yield was million tons. The total area for sugar production was million hectares and the total yield was million tons. The area and yield of different crops are shown in Table 9 and the crop composition in terms of irrigation area is listed in Table 10. Table 9: Types of crops and their cultivation area Type of crop Cultivation area (1,000 hectares) Total yield (10,000 tons) Grain Of which Rice Wheat Corn Oil plant Cotton

12 (Source: Shen Zhengrong, Strategic Study on Agricultural Water Crisis in China) Table 10 Cropping structure in terms of irrigation area and the proportion in total cultivation area Irrigation area( 1,000 hectares) Proportion of irrigation area in cultivation area(%) Song-Liao River Hai-Luan River Huai River Yellow River Yangtze River Pearl River Rivers in the southeast Rivers in the southwest Inland rivers National total Wheat Corn rice Others orchard total wheat corn rice oth ers orcha rd (Source: Shen Zhengrong, Strategic Study on Agricultural Water Crisis in China; Qian Zhengying, Water Resources in China) tot al Yield-water response relationships The irrigation area and irrigation water of typical years in different periods are shown in Table

13 Table 11 Relationship between Irrigation Area, Irrigation Water and Grain Yield Year Effective irrigation area million ha) Irrigation water( 100 million m 3 ) Proportion of irrigation water in national total water consumption (%) Populatio n (100 million) Cultivated area (million ha) Total grain yield( 100 million kg) (Source: Department of Irrigation, Drainage and Rural Water Supply, MWR) Irrigation Technologies The Chinese traditional irrigation mostly adopt flood irrigation. But with the population increase and social, economic development, there is increasing demand of water resources. So as the large water consumer, irrigation has attracted more and more attention from the whole society and the pressure on saving irrigation water and applying affordable water-saving irrigation technology has become more and more prevailing. During the past 30 years or so, China has done lots of work and achieved great results in such areas as developing irrigation technology to save water, the development and manufacture of water-saving irrigation equipment, the construction of pilot water-saving projects and the establishment of water-saving irrigation service system, etc. In 1970s, canal seepage treatment and farmland rehabilitation were carried out on a large scale; in 1980s, the application of low-pressure piped irrigation was promoted and pilot projects with such advanced water-saving irrigation technologies as sprinkler irrigation, drip irrigation and micro irrigation were set up; in 1990s, water-saving irrigation was popularized, the water-saving irrigation technologies were more and more advanced and the engineering standards became higher and higher. By the end of 1998, altogether 15.2 million ha of various water-saving irrigation projects were constructed, including 1.7 million ha sprinkler irrigation, drip irrigation and micro irrigation, 5.2 million ha piped irrigation and 8.3 million ha with canal seepage treatment. Besides, there are another 13.3 million ha with such non-structure measures as shallow irrigation for rice paddies, dry-land cropping of rice, film covering and over-film irrigation, etc. Canals are the main methods for water transfer in agricultural irrigation in China. But the 281

14 traditional earthen canals suffer serious seepage loss, which is 50-60% of the total water transferred. So canal seepage treatment has been the major technical solution for developing effective irrigation in China. There are many methods of canal seepage treatment. According to the material used for seepage treatment, there are such types of seepage treatment as earth pressurized, protected by three kinds of material mixed, lining with stone, lining with concrete, covered by film, protected by asphalt, etc, among which lining with concrete is mostly adopted, in particular, U-shaped canal concrete lining can also raise water velocity and improve sediment transport capability. Low-pressure piped irrigation was developed in the well-irrigated areas in the northern plains in the 1980s. At present, there are ready optimal design theory and methodology of pipe network and different kinds of pipes, construction technique. Pipes include double-wall waved plastic pipe, thin-wall PVC pipe, cement pipe, etc. Sprinkler and drip irrigation have been developed very rapidly in China, especially popular with some cash crops. Now China is able to manufacture various types of sprinkler and drip irrigation equipment and machine. The water-saving irrigation system is to achieve optimal allocation of limited irrigation water in the different growing periods of crops so as to improve the conversion from irrigation water to water stored in the root system to be absorbed by the crops, and also raise the efficiency of photosynthesis converted into economic production. Since the 1950s, China has set up over 400 irrigation experiment stations throughout the country to carry out long-term experiment and study of water demand and demand law of the crops and irrigation system. As a result, the irrigation system of local major crops have been obtained, and combined with meteorological data, the isogram of water demand of crops in the whole country has been drawn. Based on this, the study on water-saving irrigation system was conducted, which proposed such technologies as conserving rain for irrigation, insufficient irrigation, anti-drought irrigation and low-quota irrigation, etc. All the technologies restrict the water supply for crops, irrigate at the most critical moment, make full use of the rain and improve the regulating and storage capacity of soil. With years of practice, different places have summed up their own suitable water-saving irrigation technology and methods. For example, for such large farmland crops as wheat and corn, pipe, reel sprinkler irrigation, central pivots and traditional land leveling and furrow irrigation are suitable; for such cash crops as cotton, vegetables and fruit trees, drip irriation, micro irrigation and infiltration irrigation are adopted; for rice paddies in the south, controlled irrigation and gardenization are developed; for crops in arid and semi-arid areas in the northwest, rain collection and drip irrigation from the water collecting basin are effective. Population and Population Increase China is a country with large population. It is forecasted that the population in China will reach 1.3 billion in 2000, 1.4 billion in 2010 and 1.60 billion in 2030, which is the peak. After that, the population will decrease gradually. Between 2020 and 2050, the population will be above 1.5 billion. The forecast of population increase in shown in the table below. On one hand, the per 282

15 capita water resources will decrease with the population increase. On the other hand, the population increase will result in increased demand of domestic water use and industrial water use. Table 12 Population Growth (In thousand) Year Population (Source: Shen Zhengrong, Strategic Study on Agricultural Water Crisis in China) LEGAL ASPECTS The Water Law is the basic law in the water sector, which regulates various water issues. Besides, specific laws, regulations and policies have been formulated subject to the actual need. By now, laws on water passed and implemented include Water and Soil Conservation Law, Flood Control Law, Water Pollution Prevention and Control Law and Environmental Protection Law, etc. Besides these laws, central, provincial and local governments have also formulated many regulations. For instance, the State Council has issued 16 regulations on water resources and the Ministry of Water Resources has issued over 50 ministerial regulations after the Water Law was issued. Existing Water Right Structures As the basic law in water resources management, the Water Law has stipulated the general structure of such rights as development, utilization and protection of water resources, river regulation, flood and drought disaster prevention and reduction, water ecology and water allocation, the centralized management of water resources. In brief, water resources (both surface and ground water) belong to the state, water in the ponds and reservoirs owned by the agricultural collectives belongs to the collective; the state adopts effective measures to protect water resources and ecology; from the central level to the county level, centralized and integrated water resources management system is adopted, and water-drawing permit system is applied for drawing water directly from the ground, rivers and lakes; water use is charged; flood control measures, standards, planning and post-flood rehabilitation are paid great attention, etc. As the administrative organ for water of the State Council, the Ministry of Water Resources is responsible for the implementation of the Water Law. Water-drawing permit system is an important measure for the state to strengthen water resources management. The basic principle is that the units and individuals drawing water directly from the rivers, lakes and ground with water project or mechanized equipment should obtain water-drawing permit in line with the Implementation Method of Water-Drawing Permit System issued by the State Council and Procedures of Application and Approval of Water- Drawing Permit System issued by the Ministry of Water Resources. But for water drawn for living and poultry and other little amount of water, water transferred by water supply companies, 283

16 navigation and fish farming in the rivers and lakes, no water-drawing permit is required. For new projects and expanded or rehabilitated projects, the project owner should submit written approval of relevant authorities on the water-drawing application together with the design report. The Ministry of Water Resources is responsible for implementation, supervision and management of the water-drawing permit system. Authorized by the Ministry of Water Resources, the river basin commissions are responsible for approving and allocating waterdrawing permit in the designated river course, and also supervision and management. After the State Council issued the Implementation Method of Water-Drawing Permit System in 1993, the Ministry of Water Resources issued Procedures of Application and Approval of Water-Drawing Permit System issued and Notice on Authorization of River Basin Commissions in the Management of Water-Drawing Permit. Most provinces (municipalities) formulated their respective Details on Implementation and Management Method of Water-Drawing Permit System. Propsed reforms to existing water right structures The Water Law is a very sound law, but due to the limitation of historical conditions when the law was formulated, some problems have emerged during the implementation. The most crucial ones are as follows: the imperfect integrated water resources management system; the lack of laws and regulations governing river basin management; it can no longer adapt to the improving socialist market economy system; the regulations on water resources conservation and protection are too simple, etc. So the Water Law should be amended, including: 1. The issue of water right system and water market: Water rights are the basis for formulating various legal documents, and also the starting point of defining rights and obligations in water issues. Water rights include the ownership and use of water. The ownership is stipulated in the Water Law. But after the citizens, legal person or other organizations obtain legally the right of water use, i.e. water-drawing right, what kind of allocation right they have and whether they can transfer the right according to law should be studied carefully according to the requirement of socialist market economy. In order to establish a balance between water resources development and water environment protection, it is vital to set up a water market system and fully utilize the function of market in water allocation. 2. The reform of water resources management system: It is necessary to upgrade the management system of combining integrated management and different-level management, river basin management and regional management, and dividing right management and development management to a legal status. 3. The issue of river basin management: The river basin commissions enjoy unreplaceable positions and functions in right management, macro management, rational allocation, development, utilization and protection of water resources, the legal status and mandates of which should be specified in the Water Law. 284

17 4. Water-saving and water resources protection: With the social and economic development, water shortage and water pollution have become two major barriers of sustainable development of water resources in China. The Water Law should be amended to improve laws and regulations on water protection and water-saving so as to ensure sustainable development. INSTITUTIONAL ASPECTS Existing water institutions As the administrative organ for water of the State Council, the Ministry of Water Resources has such mandates: implementation of the Water Law and issuing of relevant regulations, integrated management and long-term planning of water resources in the whole country, regulation large rivers and lakes, overall planning of urban water resources, water and soil conservation, agricultural irrigation, organizing and management of the construction of large national water projects, organizing of flood control and drought relief of major rivers across provinces, rural hydro power development, etc. Under the Ministry, there are seven river basin commissions and a batch of scientific research institutes, universities, specialized institutions, design institutes and water and hydro power construction companies (bureaus), etc. At the six large rivers across provinces (Songhua River-Liao River, Hai River, Yellow River, Huai River, Yangtze River and Pearl River) and the Taihu Lake, river basin commissions (authority) have been set up under the Ministry of Water Resources. The river basin commissions carry out the functions authorized and entrusted by the Ministry. Quite several river basin commissions have carried out functions beyond the river basin. So in fact, there are like the regional offices of the Ministry of Water Resources. At present, the river basin commissions are not commissions in the real sense since they do not have board of directors and representatives from the provinces. Water resources department or bureau has been set up at the provincial level, which is a part of the provincial government, responsible for implementation of water laws and regulations, and receives professional guidance from the Ministry of Water Resources. The mandates are similar to those of the Ministry of Water Resources, including planning, development and utilization of water resources, planning, design, construction and management of agricultural irrigation and drainage, flood control, etc. in the respective province. At the prefecture and county levels, there are similar water resources bureaus responsible for water resources management within their own territory. The irrigation management in China is divided into three types, i.e. government management, collective management and individual management. Large and medium projects are managed by special organization set up by the water department of governments at various levels; small projects are managed by the water department of the local government; some wells, ponds and pumping stations supplying water only for one or several farm households are managed by individual. As for large and medium irrigation districts, the canals above branches are managed, operated and maintained by the special management team, and the rest is operated and 285

18 maintained by individuals or groups designated by the village. Proposed new water institutions In a macro sense, the Ministry of Water Resources has been restructured and reorganized according to the government-restructuring requirement. The essence is to further transform government function, enhance macro control function of the government in the market economy, and emphasize on policy formulation and planning of water resources management and development, and supervision of the implementation of water laws and regulations. The Ministry will no longer directly interfere operation and management of water companies. River basin management will be strengthened and the function and authority of current river basin commissions will be improved. In the near future, some river basins will be selected to try river basin management reform, during which real river basin commissions will be set up with representatives from the central government (the Ministry of Water Resources) and provinces, municipalities within the river basin. In irrigation district management, some irrigation districts will adopt the model of self-reliance. In fact, China has carried out the reform in some irrigation districts. In particular, in the World Bank financed Yangtze River Water Resources Development Project and Irrigated Agriculture Project (second phase), the model of economically independent irrigation districts has been tried and water supply companies and agricultural users association have been set up, which has established a buy-sell relationship between the two. The water supply company is responsible for the operation and maintenance of main canals and branches. The users association is responsible for the operation and maintenance within its own system and paying water fee to the company. The experiences gained will be extended to other irrigation districts, which is in the same direction as the reform of the water sector. But at present, there will be difficulties in adopting such model in irrigation districts in China on a large scale. POLITIC ASPECTS Profile of key interested groups For large and medium irrigation districts, the central government (the Ministry of Water Resources, the State Development Planning Commission and the Ministry of Finance, etc.), the provincial government (the Department of Agriculture, the Department of Finance, the Provincial Development Planning Commission, Pricing Bureau, etc.), irrigation district management organization, the village and agricultural water users are all key benefit groups. In the past, the central and provincial governments were major investor of irrigation projects and the decision-maker of such projects. The special irrigation district management organization was usually set up by the provincial water department, which is the superior organization of irrigation district management organization and also the administrative organ for water of the provincial government. The provincial agriculture department is responsible for planning of agricultural 286

19 production and providing guidance for the farmers. The provincial development planning commission is responsible for pricing policy formulation and water charge approval. The irrigation district management organization is responsible for the construction, operation and management of the district on behalf of the government, and also responsible for cost calculation and water charging. Farmers are the end-user of irrigation projects. At that time, the government decided whether an irrigation project should be constructed and how large the scale was. Seldom were the farmers consulted and their functions and requirement were ignored. Now it has been changed. The farmers can air their views in planning, design, implementation, operation and maintenance of the irrigation projects. Stakeholder response to reform initiatives Key interested groups represent different groups and benefits, they have different attitudes towards pricing reform. Central and provincial governments hope that the irrigation water price can recover its cost or cost plus minor profits based on the Water Tariff Method and other regulations and rules and thus irrigation projects realized good development. However, the increase of water tariff may cause farmers increase in agricultural production cost. On the one hand, farmers are not positive to the pricing reform; on the other hand, they are will to accept higher water tariff within their affordability if they can get better and timely service. Irrigation management agencies are very keen to water pricing reform in order to get adequate financing for operation and maintenance of irrigation facilities and self-development of the agency. In provincial governments, Water Resources Department supports tariff reforms for the sake of irrigation facilities and its management agencies sustainable development; Financial Department, as the comprehensive management organization, is unwilling to provide any more subsidiaries and hope to guarantee the normal expenditures of the project through increasing water tariff on one hand, and worries the additional burden to farmers on the other hand, therefore it is neutral to the pricing reform; Pricing Department, as the tariff approval agency, is positive towards pricing reform, but it concerns not only water supply cost but also affordability of farmers when actually performing approval authorities. ECONOMIC ASPECTS Prevailing irrigation water allocation and pricing procedures The Water Law stipulates that the priorities of water allocation are as follows: The development and utilization of water resources should first satisfy the domestic water demand of rural and urban citizens, then incorporate the needs of agricultural, industrial water use and navigation. In areas with water shortage, it is necessary of restrict urbanization and the development of high water-consuming industry and agriculture. Water allocation is defined by the superior water department and implemented after being approved by the government at the same level. In the irrigation field, the irrigation district managers can coordinate water use among farmers, such as towards high economic crops. Present water pricing administration and procedures for determining water tariff are as follows. 287

20 Generally, Chinese Central government i.e. State Council issues water pricing method and principles, and specific tariff standards are issued by relevant administrative authorities. 1. As for large water projects bordering several provinces, water tariff is proposed through consultation among the provinces, and subject to approval by State Development Planning Commission (SDPC); If the project is directly under the administration of Ministry of Water Resources (MWR), water tariff is proposed by relevant river basin commission, and subject to MWR s review and SDPC s approval. 2. As for the project under the administration of Province, the project management agency proposes water tariff plan, which is subject to the review and approval of Provincial Water Department and Pricing Department; 3. As for other projects rather than above, water tariff is proposed by project management agency and subject to review and approval of Water Resources Department and Pricing Department at the same level where the project belongs. After issuing of Water Tariff Method by State Council in 1985, provincial governments have worked out implementation regulations of Water Tariff Method in line with local conditions. The implementation regulations generally stipulate water tariff, collection method and management requirement of different water uses for various type of water projects such as reservoir, irrigation district and pumping stations in certain regions. At present water tariff is based on administrative regions and different water uses, or unified water tariff for each water use is applied in the same administrative regions if the project scale, water resource conditions and economic situation are similar. So is irrigation water tariff. Some provinces have started to specify water tariff based on the calculation of single project in 1990s. Pricing principles for different water uses can be seen in table 13. Table 13: Pricing principles for different water uses Water uses Pricing principle Agriculture Grain crops Water supply cost Cash crops Slightly higher than supply cost Industry Supply cost plus 4 to 6% profit Domestic Supply cost plus mini-small profit (Source: Water Tariff Method, State Council, 1985) Although several water pricing reforms have been carried out and irrigation water tariff commonly has been increased since 1985, irrigation water tariff is still far below the supply cost in most areas. According to statistics, the average national irrigation water tariff is yuan/m 3 in 1997, while the average water supply cost is yuan/ m 3, the water tariff accounts for only 36% of the supply cost. Water tariff in the north is normally higher than that in south of China since there are much more rainfall in south than in north. Development of water resources and water supply cost are in great difference. 288

21 Table 14: Average water supply cost in the south and north of China (yuan/ m 3 ) Agriculture Industry Domestic North part South part (Source: Wang & Huang, Water project pricing and cost recovery, China Water Resources, 1999) Dalian City has the highest irrigation water tariff, yuan/ m 3, which meets water supply cost; irrigation water tariff in Shanxi province comes the second, 0.14 yuan/ m 3 which is about 50 to 60% of water supply cost; water tariff in several large scale irrigation schemes of Shaanxi province is yuan/ m 3, 45% of the supply cost; water tariff in Hebei province is yuan/ m 3, only 25% of the cost. Table 15 shows water tariff and supply cost in some provinces and cities. Table 15: Irrigation water tariff and supply cost in some provinces and cities Region Agricultural water tariff (yuan/ m 3 ) Water supply cost (yuan/ m 3 ) Grain crops Cash crops Beijing Liaonin Province Shanxi Province Jilin Province Jiangxi Province Shandong Province Henan Province Hubei Province Guangdong Province Hainan Province Yunnan Province Gansu Province Chongqin Dalian (Source: Department of Economic Regulation, MWR) Future Water Pricing Reform The objectives of future water pricing reform are: to promote high efficiency of water use and to realize water saving and proper allocation of water resources; to guarantee steady and sustainable development of water supply projects. The specific measures are as follows. 289

22 1. Strict execution of principles for determination of water tariff, i.e. pricing according to supply cost for grain crops and supply cost plus minor profit for cash crops, thus ensuring financing of operation, maintenance and rehabilitation of irrigation projects. 2. Adopting basic pricing and water volume pricing. Basic price is to ensuring normal operation and maintenance in any operation conditions, water volume pricing is to set tariff based on the water supplied, which is aiming at cover the depreciation and overhaul cost. 3. Set water quota and supply water according to it, higher pricing for any water using exceeding the quota. 4. Adopting different tariff for different seasons or fluctuate pricing based on relationship of supply and demand. Higher pricing when supply smaller than demand, lower pricing when supply larger than demand. 5. Properly decentralizing pricing approval authority. Pricing authority stipulated in Water Tariff Method is too concentrated and adjustment procedure is too complicated. The Power for water pricing and adjustment should decentralized to County or above Pricing Department according to jurisdiction of projects. The Possible Economic Impact Brought of the Reform Proposals As discussed above the current water tariff is commonly low and can not cover its cost, operation and maintenance of irrigation facilities can not be ensured, resulting in benefit decrease of irrigation projects. Water pricing reform requires covering of total cost, which is of advantages to cost recovery of irrigation projects, ensuring timely and adequate maintenance for the projects and facilities. In the mean time, irrigation project management agencies can have further and sustainable development and provide better service to farmers. The increase of water tariff will reduce governments subsidies and burden. Water pricing reform will also promote water saving and better use of water resources, and encourage farmers to adopt new water-saving irrigation techniques. Although it may require increased initial input to adopt new water saving techniques, it will save the cost for the long run, especially in the serious water shortage west China and coast areas. Saved water can be used for other economic development. The increase of irrigation water tariff may affect some farmers, but farmers have certain potential ability for the increase since the water tariff contributes lower portion in the agricultural production cost. Increase of water tariff will enhance farmers participation in irrigation management, which is favorable to the establishment of water user associations and operate and manage the irrigation facilities by themselves, and finally reduce the cost and water tariff. Increase of water pricing will promote farmers strengthen of water use management and reduce waste of water, and it will also reduce agricultural production cost. CONCLUSION Since the adoption of China s opening up and reform policy in past 20 years, water is no longer 290