For discussion FCR(95-96)88
on 8 December 1995

ITEM FOR FINANCE COMMITTEE

HEAD 44 - ENVIRONMENTAL PROTECTION DEPARTMENT
Subhead 700 General other non-recurrent

Members are invited -

  1. to approve an increase in commitment from $790.96 million by $101.13 million to $892.09 million for the payment of ex-gratia allowances to livestock farmers; and
  2. to note the updated financial implications of the Livestock Waste Control Programme (1987-88 to 1996-97) at an estimated cost of $1,482.3 million.


PROBLEM

The approved commitment is insufficient to meet increased expenditure on payment of ex-gratia allowances to livestock farmers under the Livestock Waste Control Programme (LWCP).

PROPOSAL

2. We propose to increase the commitment from $790.96 million by $101.13 million to $892.09 million.

JUSTIFICATION

3. In 1987 we launched a ten-year LWCP following enactment of the Waste Disposal (Amendment) Ordinance. The programme prohibits livestock keeping in the Urban Council areas and new towns in the New Territories. It imposes statutory environmental standards in the remaining parts of the territory in three phases over a period of ten years.

4. Under the LWCP, livestock farmers may choose either to cease their livestock keeping business or to continue business under specified conditions including the meeting of waste disposal standards. Ex-gratia allowances are payable to ease the financial hardship of those farmers who choose to cease operation. For those who wish to continue their business in the permitted areas, they may apply for financial assistance in the form of capital grants and low interest loans to install appropriate waste treatment facilities in order to fully comply with the statutory environmental standards.

5. The rates of ex-gratia allowances payable to pig and poultry farmers are subject to periodic reviews to take into account the updated cost and prices. The most recent revision took effect from 1 October 1995 and represented an overall average increase of 6.2%. A schedule of the new rates of ex-gratia allowances for various types of livestock structures under the LWCP is at Enclosure 1.

6. Apart from the inflation-related adjustments to rates, we expect expenditure on ex-gratia payments to increase as a result of more livestock farmers opting opted to cease business. Based on the current trend of incoming applications, the Director of Environmental Protection (DEP) anticipates a further number of about 4 900 livestock structures to be granted ex-gratia allowances up to the end of the LWCP. On average, he estimates that each structure will attract about $27,000 of ex-gratia allowance based on the revised rates.

7. Up to the end of September 1995, DEP has already committed $761.33 million of the approved commitment of $790.96 million for payment of ex-gratia allowances. Based on the new rates of ex-gratia allowances and the expected increase in the number of livestock structures eligible for ex-gratia payments, DEP estimates that the total requirement for paying ex-gratia allowances for the entire LWCP will now be $892.09 million. Details are million approved by Members on 10 December 1993 (FCR(93-94)106) by $101.13 million. Details are at Enclosure 2.

FINANCIAL IMPLICATIONS

8. The updated financial implications for implementing the ten-year LWCP are set out as follows -


Phases I and
II
Control
1987-94
($ million)
Phase III
Control
1994-97
($ million)
Total
($ million)

Recurrent

(a) Staff cost

188.68
(188.68)

164.08
(142.76)

352.76
(331.44)

(b) Departmental
expenses

12.80
(12.80)

21.49
(9.99)

34.29
(22.79)

Sub-total

201.48
(201.48)

185.57
(152.75)

387.05
(354.23)

Non-recurrent

(c) Ex-gratia
allowances

614.82
(709.90)

277.27
(81.06)

892.09
(790.96)

(d) Capital grants

0.78
(101.30)

114.04
(13.52)

114.82
(114.82)

(e) Demolition
costs

10.07
(28.94)

21.79
(2.92)

31.86
(31.86)

(f) Collection
services

12.03
(12.50)

2.57
(0)

14.60
(12.50)

(g) Research and
development

3.25
(3.25)

0
(0)

3.25
(3.25)

(h) Capital works

24.77
(24.77)

0
( 0 )

24.77
(24.77)

(I) Vehicles

3.68
(3.68)

0
( 0 )

3.68
(3.68)

(j)Demonstration
project

10.18
(10.18)

0
(0)

10.18
(10.18)

Sub-total

679.58
(894.52)

415.67
(97.50)

1,095.25
(992.02)

Total

881.06
(1,096.00)

601.24
(250.25)

1,482.30
(1,346.25)

Note - Figures in brackets denote the estimated costs in FCR(93-94)106 noted by Members on 10 December 1993.

9. As regards paragraph 8(a), the increase of $22 million for Phase III control is attributable to the updated staff costs for ten posts each in the Agriculture and Fisheries Department and Lands Department and 113 posts in the Environmental Protection Department (EPD) required for the implementation of the LWCP. For the cost estimate for 1996-97, we have taken into account the deletion of ten posts in EPD as a result of contracting out the operation of the Sha Ling livestock waste composting plant.

10. As regards paragraph 8(b), the increase of $11.5 million is due to our estimate estimate that the actual tender price for contracting out the livestock waste collection service and Sha Ling composting plant operation will be much higher than that originally expected. However, this additional expenditure will be partly offset by savings arising from the deletion of the ten posts mentioned in paragraph 9.

11. As regards paragraph 8(c), we estimate the financial implications on the basis of the new rates of ex-gratia allowance and the increased number of livestock structures which will attract ex-gratia allowance.

12. As regards paragraphs 8(d) to 8(e) and 8(g) to 8(j), the financial implications remain the same as those set out in FCR(93-94)106.

13. As regards paragraph 8(f), the increase of $2.1 million is o due to the extension of the existing livestock waste collection service contract pending the new arrangement to engage a contractor to collect the waste and operate the Sha Ling composting plant which should be in place in mid 1996.

14. On the livestock waste collection service, notwithstanding our original intention to gradually transfer the cost to the livestock farmers when we first implemented the LWCP, we have now decided to continue to provide the service free of charge. We consider it essential in the final phase of the programme to secure the full co-operation of the farmers and to ensure that they will dispose of livestock waste properly. Imposition of charges at this stage will not help to achieve these objectives.. Moreover, since livestock farmers still have a lot of grievances on the LWCP and have expressed resentment on charging for the collection service, any charging may result in direct dumping of livestock waste into rivers and streams and will jeopardise the whole control programme.

15. Subject to Members’ approval of the proposal, we shall approve under delegated authority supplementary provision required in the remainder of the current financial year and include sufficient provision in the annual Estimates for the purpose.

BACKGROUND INFORMATION

16. When the ten-year LWCP was first introducede, the rates of the ex-gratia allowances payable to eligible livestock farmers who ceased their business were the same as those applicable to farmers affected by land resumption and clearance. Members approved a 30% increase over the then prevailing rates on 17 June 1988 in recognition of the extinguishment element in cessation of farming. Members also delegated to the Secretary for the Treasury authority to approve future changes of the rates in accordance with the approved formulae. Since 1988, we have revised the rates annually for seven times, including the recent revision in October 1995.

17. On 10 December 1993 Members approved, among other things, an increase in commitment from $622.38 million to $790.96 million to meet an increase in expenditure for the payment of ex-gratia allowances to livestock farmers.

Planning, Environment and Lands Branch
November 1995


Enclosure 1 to FCR(95-96)88

Revised Rates of Ex-gratia Allowances as at 1 October 1995

Based on updated costs in line with current husbandry practices and prices, the revised rates of ex-gratia allowance are as follows -

Type of livestock
structures

Per capita based
$/Head

Building area based
$/Square metre

(a) Chicken

(b) Leghorn

(c) Duck/geese

(d) Pigeon

(e) Quail

(f) Pigs

42.69

85.54

25.10

36.32

5.54

-

570.89

919.78

-

484.29

595.48

749.21

For comparison purposes, the rates as at 1 October 1994 were as follows -

Type of livestock
structures

Per capita based
$/Head

Building area based
$/Square metre

(a) Chicken

(b) Leghorn

(c) Duck/geese

(d) Pigeon

(e) Quail

(f) Pigs

39.59

84.19

24.06

35.70

5.45

-

554.53

905.31

-

476.00

586.25

679.00


Enclosure 2 to FCR(95-96)88

Actual and Estimated Expenditure on Ex-gratia Allowances under the Livestock Waste Control Programme (As at 30 September 1995)


Ex-gratia
allowances
paid out
since
Total
ex-gratia
allowances
committed up to
30 September 1995
($ million)
Estimated cash flow*
($ million)

Area No.



Remainder
1995-96

1996-97

1997-98

Total
1995-98

1 - 9A

11

June 1988

19.90

0

0

0

0

10, 12-14
& 11R-25R

June 1988

273.30

9.57

2.39

0

11.96

15-17

June 1991

292.53

25.03

39.10

0

64.13

18-25

June 1992

175.60

6.99

23.84

23.84

54.67

Total

-

761.33#

41.59

65.33

23.84

130.76#

* Based on the rates of ex-gratia allowance effective from 1 October 1995

# Total financial implications (1988-1998)

= $761.33 million + $130.76 million = $892.09 million