(August 26, 2010) The final price tag for the ambitious and controversial plan to move water from the south of China to the water-starved North continues to grow, writes Toh Han Shih in the South China Morning Post.

Higher compensation costs have increased resettlement costs for the already expensive South-North Water Diversion Project by at least 6 billion yuan (HK$6.9 billion), according to a recent report by International Rivers, an international environmental NGO.

The project, China’s largest water project since the Three Gorges Dam, aims to supply the arid north with water from the Yangtze River through three big waterways, the eastern, middle and western routes. The middle waterway is scheduled to start supplying Beijing with water from Danjiangkou Reservoir in Hubei – which stretches across the Han River, a tributary of the Yangtze – in 2014. The plan requires relocating 330,000 people from Danjiangkou over the next three years, China’s biggest resettlement since the Three Gorges Dam. Of the 330,000 people, 141,000 were supposed to be relocated by the end of this month, the report said.

The compensation for resettling each person from Danjiangkou was 32,000 yuan, more than four times the 7,500 yuan compensation for resettling each person from the Three Gorges Dam during the 1990s, the report said. Taking inflation into account, in real terms, the compensation per person in Danjiangkou is 2.3 times higher than for the dam project, according to the report.

With 7,500 yuan equal to 14,000 yuan today in real terms, the difference between the two compensation schemes is 18,000 yuan. That means compensating the 330,000 residents of Danjiangkou will cost roughly 6 billion yuan more than compensation cost for the dam project.

Peter Bosshard – policy director of International Rivers, based in Berkeley, California – praised the higher compensation for residents but had his own opinion about how the water problem could best be solved.

“The solution to China’s water crisis will not be grand, expensive engineering schemes, but improvements in efficiency,” he said. “Improvements in efficiency make more economic sense than expensive projects.”

The official total resettlement budget for Danjiangkou is 25 billion yuan, and the latest official estimate for the entire south-north project is 420 billion yuan, nearly triple the official estimate in 1991.

About 100,000 Danjiangkou residents would be relocated to nearby areas, which would increase population density and pressure on arable lands and degrade the environment in the area around the reservoir, the report said.

As the project diverts water northward “there will be a serious problem in pollution and with fisheries. When the water flow is slower, pollution will increase. We’ve seen that in the Three Gorges,” Bosshard said.

One reason the compensation for the south-north project was higher than for the Three Gorges Dam was that private developers were paying more to acquire land, said Patricia Adams, executive director of Probe International, an environmental advocacy group.

“So, apparently, to avoid provoking civil unrest, the South-North Water Diversion Project officials raised compensation in this area.”