Dynamic analysis of financial cost of water and pricing policy : a case study of Nanjing, P.R. China
Date
1995-08
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Abstract
A dynamic model was constructed to analyze the process of municipal water supply
and water pricing policies in Nanjing, China. The analyses show that the marginal cost is
increasing as the water supply increases, since the land and water .resource are limited In
such case, to achieve economic efficiency, the water price can lie set equal to marginal cost
of water. Such a policy will allow the water company to accumulate the funds for future
investments.
it is also shown that, in Nanjing, the municipal water supply is a capital intensive industry.
When the scale of total supply is increasing, the required capital stock for the water supply
will increase faster than the growth rate of total supply, because capital goods become
relatively more expensive in China since 1980. Comparatively, the required number of
employees in Nanjing Water Supply Company will increase with a much lower growth rate.
The results of the simulation predicts that, with proper water pricing policy and
management, water supply can be a self-financed (even profitable) industry, even though
the water supply company in Nanjing has the big budget deficits at present.
Water quality has also become an important issue in Nanjing. Some evidence shows
that the decline in the quality -of water may be a contributory cause of cancer, hence more
attention should be direct to the quality of the water and environmental protection. To
improve the quality of water, Nanjing will need technical assistance.
Description
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IDRC Final Report
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Keywords
CHINA--NANJING, WATER SUPPLY, WATER MANAGEMENT, WATER QUALITY, ENVIRONMENTAL DEGRADATION, WATER PRICES, ENVIRONMENTAL ECONOMICS, COST ANALYSIS, SUPPLY AND DEMAND, MATHEMATICAL MODELS, SIMULATION, FORECASTS, SURVEYS, ECONOMETRIC ANALYSIS, PUBLIC SERVICES