BEIJING,Nov.30 (Xinhuanet)--Residents in China's parched northern regions must be prepared to pay a higher price for water that will be pumped - in the world's largest water-diversion project - from the deluged south to satisfy the growing demand in the north, officials and analysts said.

    This increase was necessary to help finance the multi-billion-dollar construction, but the price of water was likely to remain affordable for the majority of urban residents, they added.

    Vice-Minister of Water Resources Zhang Jiyao said: “At present, urban water prices are low.”

    “There is still room for adjustment upwards that users can accept.”

    “Therefore, by judiciously raising existing urban residential and industrial prices in areas that will benefit, we can collect a portion of the funds needed for construction.”

    The first phase of the project is estimated to cost US$18.7 billion over a 10-year period. The cost of the entire project will be more than double that of the Three Gorges Dam project, which is expected to cost below US$22 billion.

    Thirty-five per cent of the project's financing will come from the increase in water rates, while 20 per cent will be underwritten by the government. The remaining 45 per cent will be financed through bank loans.

    The project has sparked some environmental concerns - such as the possibility of flooding in the immediate downstream areas along the central route if adequate measures are not taken - but much of the criticism so far has been directed at the possible increase in water rates.

    Addressing these concerns, Mr Zhang told the official Xinhua news agency that prices may increase between 20 and 70 fen in different areas.

    However, he said, factors such as the operation and maintenance of urban pipeline systems and the treatment of polluted water could increase the prices further.

    Analysts told The Straits Times that prices in Beijing could double by 2005 from the current 2 yuan per cubic metre, while in Tianjin, prices could rise to 1.75 yuan per cubic metre - 30-40 fen above current levels.

    They said the increases, if any, should be kept to below one yuan.

    The Chinese government is pushing ahead with the project, hoping that it will alleviate chronic water shortages in the country's north.

    The official China Daily cited a recent survey that shows that two-thirds of 600 Chinese cities suffer from chronic shortages that result in more than US$14.5 billion in economic losses every year.

    The initial phase of the project involves building new canals and enlarging existing ones, to connect river systems in eastern and central China.

    The entire plan is aimed at channelling water through three massive north-south aqueducts, namely the central, western and eastern canals, and perhaps, pipelines.

    Upon completion of the eastern and central canals, severe water shortages in Shandong should end by 2007 and in Beijing, Tianjin, and other areas in the north, by 2010.Enditem(Straits Times, Sigapore)