Joint Circular No. 95/2009/TTLT-BTC-BXD-BNN guiding principles and methods for determining and deciding the consumption price of clean water in urban areas, industrial zones, and rural areas.

JOINT CIRCULAR

Guidelines for principles, methods of determining and authority to decide the price of clean water consumption in urban areas, industrial zones, and rural regions.

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Pursuant to Decree No. 170/2003/NĐ-CP dated December 25, 2003 of the Government detailing the implementation of certain provisions of the Price Ordinance, and Decree No. 75/2008/NĐ-CP dated June 9, 2008 on amending and supplementing certain articles of Decree No. 170/2003/NĐ-CP;

Pursuant to Decree No. 117/2007/NĐ-CP dated July 11, 2007 of the Government on production, supply, and consumption of clean water;

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008, of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 01/2008/NĐ-CP dated January 3, 2008, of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Agriculture and Rural Development;

WHEREAS, Decree No. 17/2008/NĐ-CP dated February 4, 2008 of the Government stipulates the functions, tasks, powers, and organizational structure of the Ministry of Construction;

The Ministry of Finance, the Ministry of Construction, and the Ministry of Agriculture and Rural Development jointly issue guidelines for principles, methods of determining and authority to decide the price of clean water consumption in urban areas, industrial zones, and rural regions as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

These guidelines provide guidance on principles, methods of determining the price of clean water consumption and the authority to decide the price of clean water to serve as a basis for establishing, submitting, reviewing, and approving pricing plans and decisions on the price of clean water consumption implemented in urban areas, industrial zones, and rural regions.

Article 2. Applicability

These guidelines apply to organizations with the authority to establish, submit, review, and decide on the price of clean water consumption according to the law; water supply units providing water services in wholesale and retail sectors, and customers using clean water.

Chapter II

PRINCIPLES FOR DETERMINING THE PRICE OF CLEAN WATER CONSUMPTION

Article 3. Principles for determining the price of clean water consumption:

1. The price of clean water consumption must accurately and fully cover reasonable production costs, total cost throughout the production, distribution, and consumption process based on technical standards, economic and technical norms approved by competent authorities, and a reasonable profit margin for the volume of commercial water produced by organizations or individuals undertaking part or all of the activities of extracting, producing, transmitting, wholesaling, and retailing clean water (referred to as water supply units) in accordance with the pricing regulations issued by the State and the guidelines provided in this Circular to enable water supply units to maintain and develop their operations; however, it must be consistent with the supply and demand relationship for clean water and the socio-economic development conditions of the country, region, and income levels of the people at different times. Ensuring the rights and legitimate interests of water supply units and consumers; encouraging water supply units to improve service quality and strive to reduce costs and water losses to meet customer needs, while promoting water conservation among consumers.

2. The price of clean water consumption for water supply units shall not be differentiated by economic sector; nor shall it be differentiated by the type of user whether they are domestic or foreign organizations or individuals, but it shall be determined separately for different purposes of water use such as: water for residential use (taking into account support for poor people in ethnic minority and mountainous areas, coastal and island areas, border areas according to current national criteria); water for administrative agencies, public institutions; for production, business, and services, in line with the characteristics of water consumption, water sources, and water production conditions in each region, locality, and area.

3. The price of clean water consumption for residential use shall be set in accordance with the quality of water as stipulated by current technical standards issued by competent authorities.

4. The price of clean water consumption shall be set in accordance with the principles and methods of determining prices and the authority prescribed by the State.

Article 4. Principles for Adjusting Prices:

When production costs and the cost of clean water calculated according to the above principles fluctuate, or when there are changes in water treatment technology, service quality standards, and related state policies that cause the consumption cost of clean water to increase (or decrease) by at least 15%, the competent authority must consider adjusting the consumption price of clean water accordingly.

Chapter III

METHODS FOR DETERMINING THE CONSUMPTION PRICE OF CLEAN WATER

Article 5. Method for Determining the Total Cost of Clean Water Products:

The total cost of clean water products serving as the basis for pricing must be calculated based on the economic and technical standards for clean water production approved by the competent authority, not the average cost of water supply units in the province, including the following costs:

1. For clean water in urban areas and industrial zones (including industrial parks, export processing zones, high-tech zones, and economic zones - collectively referred to as industrial zones)

The details of each cost item are as follows:

a/ Direct material costs include expenses for raw materials, fuels, and power directly used in producing the product such as: raw water costs (for businesses that need to purchase raw water), electricity, alum, chlorine, and other auxiliary materials used in water treatment processes.

Direct material costs are determined by multiplying the total quantity of materials used with the corresponding material prices; wherein:

- The quantity of materials used for producing clean water in urban areas and industrial zones shall be applied according to the economic and technical standards for clean water production published or issued by the Ministry of Construction or the competent authority. For materials not yet announced or issued within the economic and technical standards system, the Chairman of the Board of Management or General Director/Governor of the water supply unit shall establish standards in the consumption price plan and submit them for approval by the provincial People's Committee;

- Material prices are actual purchase prices according to state-set prices or price announcements/directions at the time of calculation (for materials still subject to state price regulations and management through registration, declaration, or public information disclosure) or market prices recorded on invoices from sellers at the time of calculation (for materials not included in the list of state-regulated or announced prices), plus (+) reasonable circulation costs (if any).

b/ Direct labor costs include payments made to workers directly involved in production such as: wages, salaries, and allowances with wage characteristics, meal allowances, social insurance, health insurance, unemployment insurance, and trade union fees for workers directly producing water, including:

- Wages and salaries are determined by multiplying the number of working days according to the economic and technical standards for clean water production published or issued by the Ministry of Construction or the competent authority with the corresponding daily wage rate (the daily wage rate includes basic wages and allowances stipulated by the state);

- Meal allowances between shifts (if applicable) for workers participating in business activities according to current regulations;

- Social insurance, health insurance, unemployment insurance, and trade union fees for workers directly involved in production according to current state regulations.

c/ Common production costs include indirect production costs outside of direct material and labor costs specified in points a and b above, incurred by production units of the enterprise such as: depreciation, repair of fixed assets; material, tools, and equipment costs for workshops; wages, allowances, and meal allowances (if applicable) paid to workshop staff; social insurance, health insurance, unemployment insurance, and trade union fees for workshop staff; service procurement costs and other monetary costs.

Depreciation of fixed assets (Tangible Fixed Assets - TFA) is calculated according to the following principle:

- For fixed assets formed from state budget funds: manage and use asset depreciation according to the regulations of the Ministry of Finance.

- For fixed assets formed from ODA funds: implement asset depreciation extraction and management according to the regulations of the Ministry of Finance or according to agreements in relevant international treaties if these treaties have different provisions from those of the Ministry of Finance.

- For fixed assets formed from borrowed funds (excluding ODA loans): asset depreciation is calculated based on the loan repayment period of the water supply project.

d/ Corporate management costs include all expenses for the corporate management and operation structure, common expenses for the entire enterprise such as: depreciation, repair of fixed assets serving management and operation within the enterprise; wages, salaries, and allowances, meal allowances (if applicable) paid to the board of directors and management staff in various departments; social insurance, health insurance, unemployment insurance, and trade union fees for the corporate management structure; office material and equipment costs, taxes, fees, and charges, external service procurement costs belonging to the enterprise office; other common expenses for the entire enterprise such as: interest payments, inventory reserve losses, bad debt reserves, hospitality and transaction costs, scientific research and technological innovation costs, initiative and improvement costs, environmental protection costs, education and training costs, medical care costs for enterprise employees, female employee costs, and other management costs according to current regulations. Corporate management costs are allocated to product costs according to appropriate criteria for enterprise products such as: clean water production, construction installation, and other enterprise products (if any).

đ/ Selling expenses include all costs related to the consumption of products and services, such as: investment costs including water meters and other auxiliary equipment from tertiary networks to the connection point with water users, except where the parties have agreed otherwise; wages, allowances, and mid-shift meal expenses (if any); social insurance; health insurance, unemployment insurance, and trade union fees for sales personnel; advertising costs, service procurement costs, and other costs as prescribed by current regulations.

When determining total cost, water supply units must comply with the Pricing Regulation and Inventory of Goods and Services issued by the Ministry of Finance and the guidance provided in this Circular.

2. For rural clean water:

a/ Direct material costs include expenses for raw materials, fuels, and power directly used in producing the product such as: raw water costs (for businesses that need to purchase raw water), electricity, alum, chlorine, and other auxiliary materials used in water treatment processes.

Direct material costs are determined by multiplying the total quantity of materials used with the corresponding material prices; wherein:

- The volume of main materials used for rural clean water shall be applied according to technical and economic standards for clean water production established by the Ministry of Agriculture and Rural Development or authorized agencies.

- Material costs are actual purchase prices based on state-set prices or announced prices, guided prices at the time of calculation (for materials subject to state pricing and price management through registration, declaration, and public information disclosure) or market prices recorded on invoices from sellers at the time of calculation (for materials not included in the state's price regulation list), plus (+) reasonable circulation costs (if any).

b/ Direct labor costs

- If the water supply unit is operated and managed by rural clean water businesses, direct labor costs shall be determined according to the method used for direct labor costs in urban and industrial zone clean water production, specifically:

+ Wages and labor fees are calculated by multiplying the number of workdays according to the technical and economic standards for clean water production published and issued by the Ministry of Agriculture and Rural Development or authorized agencies by the corresponding daily wage rate (the daily wage rate includes basic wages and allowances as stipulated by the state);

+ Mid-shift meal expenses (if any) for workers involved in business operations shall be implemented according to current regulations;

+ Social insurance, health insurance, unemployment insurance, and trade union fees for direct production workers shall be implemented according to current state regulations.

- If the water supply unit is managed and operated by cooperatives, community residents, individuals, etc., direct labor costs shall be calculated based on the results of discussions and agreements reached at the member assembly or based on agreements between the community water users and the water supply unit, but not lower than the minimum wage of rural clean water production and business enterprises in the same region, equivalent to the average wage level in the local area, and consistent with current state regulations.

c/ Common production costs (if incurred) shall be calculated in the same manner as common production costs for clean water production and business in urban areas and industrial zones.

Specifically, depreciation costs for fixed assets shall be calculated according to the following principles:

- For fixed assets formed from state budget funds (including ODA funds); foreign organizations and individual donations; depreciation of fixed assets shall be calculated according to the regulations of the Ministry of Finance or the regulations of donors if these differ from those of the Ministry of Finance.

- For fixed assets formed from borrowed funds (excluding ODA loans), depreciation of fixed assets shall be calculated based on the loan repayment period of the water supply project.

- For fixed assets formed from customer contributions, depreciation shall be calculated according to the regulations of the Ministry of Finance to ensure that water supply units can maintain and develop.

d/ Administrative expenses (if incurred): shall be calculated in the same manner as administrative expenses for clean water production and business in urban areas and industrial zones.

đ/ Selling expenses (if incurred): shall be calculated in the same manner as selling expenses for clean water production and business in urban areas and industrial zones.

Article 6. Average clean water consumption price (retail price)

The average clean water consumption price (excluding value-added tax) is determined according to the following formula:

Where:

1/ Gttbq is the average consumption price (unit: VND/m3).

2/ GTtb is the total cost of clean water production (unit: VND) as specified in Chapter III, Article 5 of this Circular.

3/ SLtp is the commercial water volume, determined as follows:

SLtp = SLsx – KLhh

Where:

- SLtp: is the commercial water volume (unit: m3/year);

- SLsx: is the production water volume.

+ Production water volume for urban areas and industrial zones: calculated based on the annual exploitation plan approved by the People's Committee of the province/city directly under the central government (hereinafter referred to as the Provincial People's Committee) (unit: m3/year).

+ Production water volume for rural areas:

If the water supply unit is operated and managed by clean water businesses, it is determined similarly to the production water volume of urban areas and industrial zones.

If the water supply unit is operated and managed by cooperatives, communities, or individuals: it is the actual water volume exploited in the year by each unit based on agreements on water supply needs between the water supply unit and water consumers.

- KLhh: is the water loss volume (including natural and technical losses, leakage, and revenue loss compared to the production water volume) (unit: m3); the water loss volume is determined by multiplying the percentage rate with the production water volume, depending on the specific technical conditions and management level during production and distribution in each locality, resulting in different loss rates. The specific water loss rate is stipulated by the Provincial People's Committee and included in the allocation calculation within the clean water consumption price, with a maximum rate not exceeding the following provisions:

+ For the entire water supply network that has been in use for less than 10 years: 25%

+ For the entire water supply network that has been in use for 10 years or more: 33%

+ In cases where the water supply network has been in use for mixed periods (including networks under 10 years and those over 10 years): 29%

For water supply units that have actually reduced the loss rate below the maximum rate above, the actual loss rate must be applied.

This loss rate must be monitored and summarized from actual production and business operations, and strict management measures must be implemented to gradually reduce the loss rate to the lowest possible level. In special cases, the water loss rate is decided by the Provincial People's Committee after obtaining the unified opinion of the Ministry of Construction (for clean water in urban areas and industrial zones) and the Ministry of Agriculture and Rural Development (for clean water in rural areas). The Provincial People's Committee approves programs to prevent water loss and leakage and establishes incentive mechanisms for water supply units effectively implementing these programs.

4/ P: is the reasonable profit margin. Based on the actual business conditions of clean water businesses and local residents' income, the Provincial People's Committee stipulates a reasonable profit margin in the structure of the clean water consumption price, with a minimum of 3% of the equity capital.

The method for calculating the average clean water consumption price is used to determine the average clean water price and serves as a basis for calculating the clean water consumption price for each purpose, ensuring that the clean water consumption price for each purpose is consistent with the average clean water consumption price.

Article 7. Clean Water Consumption Price for Each Purpose

1/ Wholesale clean water price:

The wholesale clean water price is agreed upon between the wholesale water supply unit (the unit selling clean water to another water supply unit for direct sale to end-users) and the retail water supply unit (the unit selling clean water directly to end-users) to ensure that both the wholesale and retail water supply units can cover production and business costs and achieve a reasonable profit margin. In case of disagreement on the price, either party (or both parties) may request the provincial Department of Finance to organize price negotiation in accordance with the law.

2/ Clean water consumption price (excluding value-added tax) for each purpose:

The clean water consumption price for domestic use is applied through a progressive pricing mechanism, with households using less water within the usage quota paying lower prices and vice versa. The clean water consumption price for other purposes applies a single pricing mechanism but with different prices based on the specific water usage purpose.

In places where there is excess water supply capacity compared to demand, the progressive pricing mechanism for domestic clean water consumption may not be implemented, instead applying the average domestic water price to encourage clean water usage and improve hygiene safety; at the same time, it also provides opportunities for water supply enterprises to develop distribution networks and enhance production efficiency.

Based on the determined average clean water consumption price, the framework of domestic clean water consumption prices set by the Ministry of Finance, and the local water consumption structure, the specific clean water consumption price for each purpose is determined to be appropriate, following the principle that the weighted average of all water prices for various purposes equals the average clean water consumption price. (For domestic clean water sales, the overall average price shall not be lower than the minimum price and not higher than the maximum price in the framework set by the Ministry of Finance).

The formula for calculating the clean water consumption price for each purpose is as follows:

Gttthmđ = Gttbq X Httthmđ

Where:

Gttthmđ is the clean water consumption price for each purpose

Gttbq is the average clean water consumption price

Httthmđ is the pricing factor based on the purpose of use, determined as follows:

a/ For the amount of clean water used for daily living by households: Apply according to the pricing coefficient table above. In cases where the number of people using clean water in a household (including collective housing) can be determined, the pricing coefficient may be applied based on the water usage quota (in m3/person/month) as follows:

- Level 2.5 m3/person/month                      SH1 0.8

If the usage exceeds this level, apply the progressive pricing as follows:

- Over 2.5 m3 - 5 m3/person/month            SH2 1.0

- Over 5 m3 - 7.5 m3/person/month            SH3 1.2

- Over 7.5 m3/person/month                      SH4 2.0

For households consuming clean water without a meter installed to measure water usage, temporarily apply a fixed charge based on a usage rate of 4 m3/month per person, or 16 m3/month per household if the local area cannot calculate usage per person, according to the SH2 consumption rate.

In special cases, for areas where the main production and consumption of clean water is for household use, and the consumption price does not meet the maximum pricing coefficient as prescribed, the pricing coefficient for the first SH1 level may be adjusted beyond the maximum coefficient to ensure that the average clean water consumption price equals 1.

In cases where students and workers renting houses (with a lease term of 12 months or more) have landlords who purchase water from water supply units to provide for their use, each group of four people (based on temporary residence registration certificates and rental contracts confirmed by the local authority) shall be considered as one household for water usage purposes, allowing the water supply unit to apply the residential water price to the landlord and guide the landlord to sell water to these individuals at the price applied by the water supply unit to the landlord.

In cases where urban industrial water supply units provide clean water for daily living to rural farmers outside urban areas upon request, the clean water consumption price shall be calculated based on the clean water consumption price in urban and industrial areas.

b/ For entities using clean water for other purposes such as administrative agencies, public services, businesses engaged in production and service activities..., the clean water consumption price shall be set by the clean water production and trading business according to the pricing plan approved by the Provincial People's Committee but shall not exceed the maximum pricing coefficient stipulated in this Circular. Based on the maximum pricing coefficient table compared to the average price, determine the appropriate pricing coefficient according to the characteristics of clean water consumption and the ratio of clean water usage for different purposes in the locality.

In cases where urban and industrial water supply units provide water according to customer requests for purposes other than those mentioned above in areas outside urban and industrial zones, the clean water consumption price shall be calculated based on the applicable water price for each purpose in urban and industrial areas.

In cases where customers use only one water meter for multiple purposes with a water usage contract, the water supply unit and the customer shall base the actual water usage situation to agree on specific water usage ratios for each purpose to apply appropriate water prices for each usage purpose. If the water supply unit and the customer cannot agree on specific water usage ratios for each purpose, they shall report to the specialized management department for review and resolution.

For particularly difficult rural areas, ethnic minority and mountainous regions, coastal and island areas, border regions according to current national criteria, if the Provincial People's Committee approves a lower clean water consumption pricing plan than the correct and full pricing plan currently in force to suit the payment capacity of residents, then the Provincial People's Committee will implement policies to balance the price levels between urban water supply units and rural water supply units (if rural water supply units are dependent on urban water supply units) to ensure the operation of rural water supply units. For provinces unable to balance the price levels between urban and rural water supply units due to legal restrictions on enterprises, the Provincial People's Committee shall annually consider and subsidize from the local budget to ensure the rights and legitimate interests of water supply units.

Chapter IV

AUTHORITY TO DETERMINE THE CLEAN WATER CONSUMPTION PRICE AND MANAGE THE CLEAN WATER CONSUMPTION PRICE

Article 8. Authorities and responsibilities of agencies and units in establishing, submitting, and reviewing pricing plans

1/ The Department of Price Management under the Ministry of Finance shall cooperate with relevant agencies to develop the framework for the price of clean water for daily use to be decided by the Minister of Finance.

2/ Clean water supply units shall base on the framework for the price of clean water for daily use prescribed by the Ministry of Finance; the pricing rules issued by the State; the principles and methods for determining the price of clean water stipulated in this Circular to develop pricing plans for clean water to report to the specialized management department for the specialized management department to issue a document to send to the Department of Finance for review before submitting to the People's Committee of the province for decision and approval.

Article 9. Pricing Decision Authority

1/ The Ministry of Finance shall prescribe the framework for the price of clean water for daily use applicable nationwide.

2/ The People's Committee of the Province shall approve the pricing plan for clean water submitted by the clean water supply unit and issue specific pricing tables for clean water for daily use within its jurisdiction, consistent with the framework set by the Minister of Finance. In special cases, the People's Committee of the Province may decide the consumption price of clean water up to 20% above the maximum level of the framework for the consumption price of clean water for daily use, provided that any increase exceeding 20% of the maximum level of the framework for the consumption price of clean water for daily use must have the agreement of the Ministry of Finance.

3/ Clean water supply units shall independently decide the price of clean water for purposes other than daily use, in accordance with the approved pricing plan for clean water by the People's Committee of the province.

Chapter V

IMPLEMENTATION

Article 10. Implementation Organization

1/ The Ministry of Finance, the Ministry of Construction, and the Ministry of Agriculture and Rural Development shall periodically or urgently inspect the establishment and issuance of regulations on managing the consumption price of clean water at localities and clean water supply units according to the contents of this Circular.

2/ The Department of Finance shall take the lead in coordinating with the Department of Construction, the Department of Agriculture and Rural Development, and related departments to inspect the implementation of decisions on the consumption price of clean water for daily use, inspect the establishment, decision-making, and implementation of the consumption price of clean water applied to users at localities, advise the People's Committee of the province to promptly address any difficulties arising; simultaneously compile reports to the Ministry of Finance, the Ministry of Construction, and the Ministry of Agriculture and Rural Development to monitor and adjust the framework price when necessary.

3/ Clean water production and business units must have plans to develop sources and distribution networks to meet consumption needs, improve water service quality; while regularly monitoring and inspecting clean water consumption, collecting water fees accurately and appropriately for each user category; promptly taking measures to address water loss and prevent revenue loss from water fees.

4/ Depending on the actual situation of clean water production and consumption in cities, industrial zones, and rural areas during each period, the Ministry of Finance shall cooperate with the Ministry of Construction and the Ministry of Agriculture and Rural Development to study, amend, and supplement the pricing method for clean water consumption to ensure appropriateness.

Article 11. Effective Date

This Circular takes effect from July 8, 2009, and replaces Joint Circular No. 104/2004/TTLB/BTC-BXD dated November 8, 2004, of the Ministry of Finance and the Ministry of Construction guiding the principles, methods for determining, and decision-making authority for the consumption price of clean water in cities, industrial zones, and rural residential clusters.

During the implementation process, if there are any difficulties, they should be reported promptly to the Ministry of Finance, the Ministry of Construction, and the Ministry of Agriculture and Rural Development for consideration, supplementation, and amendment to ensure appropriateness./.