Extract from the minutes of the Finance Committee meeting on 30.3.1998

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Item No. 2 - FCR(97-98)118

‥ Subhead 700 General other non-recurrent
Study on the Trade Effluent Surcharge scheme

2. As consultancy studies had previously been undertaken on the Trade Effluent Surcharge (TES) scheme, some members queried the need for another consultancy study. They enquired about the method of assessment, and if the proposed study could be undertaken by staff of the Environmental Protection Department, given its considerable resources and responsibilities for environmental protection.

3. The Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) said in reply that when the TES scheme was introduced in 1995, the Administration had undertaken to review the scheme a year after its implementation. Consultants commissioned to conduct the review in 1996 found that the discharge factors of six existing trades were lower than the designated values, while another seven trades might be included in the scheme. Both recommendations were however subject to more indepth reviews, and a proposal had accordingly been made for a more comprehensive analysis to be conducted. PAS/PEL added that the review undertaken in 1996, which spanned over five months at a cost of $6 million, was an overall and general one which did not go into every detail on account of cost and time considerations. The intention was for detailed analysis on specific areas to be conducted at a later stage where necessary.

4. The Assistant Director of Environmental Protection (AD/EP) also explained that about 9 000 accounts were involved and a sample survey of 5% of these accounts would cover about 450 to 500 business premises. A major portion of the consultancy study cost of $14 million would be for meeting the survey expenses. The magnitude of the study did not make it possible for the task to be undertaken by staff of the Environmental Protection Department, and it was more appropriate for a study of this nature to be conducted by independent consultants who would be chosen by a selection committee.

5. As regards the method of assessment, AD/EP said that TES was charged on the Chemical Oxygen Demand value. If the discharge factors were above the normal sewage demand level of 500 mg/litre, a charge would be made in relation to the excess level. This was a well-tried and simple method in working out the discharge factors of the trades concerned. As to whether recommendations in the forthcoming study would be used as the basis on which TES rates would be charged, PAS/PEL assured the member that any revisions to the rates would be made through the legislative process and Council Members would be duly consulted.

6. Some members were dissatisfied with the need to spend $14 million for appointing consultants to re-examine the conclusions made by another group of consultants. They also expressed concern about the loss borne by the six trades, and with the nuisance caused to the trades at the time of the survey as was experienced previously.

7. In reply, PAS/PEL and AD/EP advised that the TES scheme was designed to be administratively simple with generic discharge factors being set for each trade, instead of having different discharge factors for each separate account. The intention of the study was to bring equity into the system by carrying out a review to consider whether the originally set discharge factors were still applicable for each trade. The alternative would be for an individual account holder to object to its discharge factor if it was considered incorrect.

8. On consultation with the Environmental Affairs Panel, PAS/PEL pointed out that the Administration had consulted the Panel on several occasions before, during and after the review. In its last submission to the Panel in January 1998 to report the Administration's consideration and findings of the recommendations made by the consultant, it was clearly stated under "The Way Forward" that the Administration would bid for funds to carry out the proposed study under consideration at an estimated cost of $14 million, although a detailed breakdown of the cost was not given. Nevertheless, he agreed to consult the Panel before finalising the study brief for the consultants. He supplemented that for the review in 1996, the Administration had also consulted the trades, political parties and Council Members before the consultants' brief was finalised. Admin

9. Some members considered it necessary for the proposal to be examined thoroughly, and suggested withdrawal of the item. The Deputy Secretary for the Treasury advised that in view of the undertaking by the Planning, Environment and Lands Bureau to undertake further consultation with the Environmental Affairs Panel, the Administration would withdraw the proposal.

10. The proposal was withdrawn by the Administration.