Harbin Water Supply Project [Loan 1995-PRC]

While price setting in a tightly regulated market is often an act of balancing a large number of concerns, it is important to give due consideration to the long-term sustainability of the water utility, including investment in its modernization and expansion. If tariff income falls short of requirements (assuming normative operational efficiencies), government support is required. However, as ADB may not be in a position to influence water tariff levels and structures, ADB should review the merits of including tariff setting-related covenants in the loan and project agreements, or seeking assurances on this matter.