Circular No. 13/2018/TT-BXD dated December 27, 2018 of the Ministry of Construction guiding method for determination of drainage service prices

THE MINISTRY OF CONSTRUCTION

Circular No. 13/2018/TT-BXD dated December 27, 2018 of the Ministry of Construction guiding method for determination of drainage service prices

Pursuant to the Government’s Decree No. 81/2017/ND-CP dated July 17, 2017 defining functions, tasks, powers and organizational structure of the Ministry of Construction;

Pursuant to Clause 1 Article 38 of the Government’s Decree No. 80/2014/ND-CP dated August 06, 2014 on the wastewater drainage and treatment;

Pursuant to the Government’s Decree No. 177/2013/ND-CP dated November 14, 2013 detailing and guiding a number of articles of the Law on Price and the Government’s Decree No. 149/2016/ND-CP dated November 11, 2016 amending, supplementing a number of articles of the Decree No. 177/2013/ND-CP dated November 14, 2013 of the Government detailing and guiding a number of articles of the Law on Price;

At the request of the Director of the Department of Construction Economics;

The Minister of Construction promulgates a Circular introducing the method for determining drainage service prices.

Article 1. Scope of adjustment and subjects of application

1. This Circular provides guidance on the method for determining the prices of wastewater drainage and treatment services (hereinafter referred to as "drainage services") associated with drainage systems, which shall be used as the basis for setting, appraising and approving specific prices of drainage services rendered in urban areas, industrial parks, economic zones, export processing zones, hi-tech parks (hereinafter referred to as "industrial parks") and rural settlements.

2. This Circular applies to organizations, individuals and households that have operations related to the drainage and treatment of wastewater; organizations and regulatory authorities involved in setting, appraising and approving drainage service prices, and providers of wastewater drainage and treatment services in the territory of Vietnam.

3. Industrial complexes and trade villages are encouraged to apply regulations herein.

Article 2. Rules for determining drainage service prices

1. Determination of drainage service price must be conformable with wastewater treatment technical processes/ technologies, technical regulations/ standards and technical-social norms on wastewater drainage and treatment promulgated or announced by regulatory authorities, the service quality and the Government’s policies.

2. The drainage service price must be accurately and sufficiently calculated, comprised of reasonable and legitimate costs of investment and operation of the drainage system, and conformable with the actual status of the drainage service provider as well as local technical infrastructure facilities.

3. The specific price of each drainage service type such as the drainage system maintenance service or the wastewater treatment service, or the price of the entire drainage service shall be determined depending on demands of drainage service users and actual conditions of each drainage service provider.

4. The drainage service prices (including the prices of the drainage system maintenance service and the wastewater treatment service) must be consistently calculated in m³of wastewater in conformity with connection characteristics of the wastewater drainage system.

Article 3. Determining drainage service prices

1. The prime cost of the drainage service per 01 m³of wastewater shall be determined by adopting the following formula:

(1)

Where:

a) Z_TB: The average prime cost of the drainage service per 01 m³of wastewater (unit: VND/m³);

b) C_T: Total cost of the drainage system which is determined according to Article 4 hereof;

c) SL_T: Total amount of wastewater collected and treated by the drainage system (unit: m³).With regard to the general drainage system:  Total amount of treated wastewater of the general drainage system is the wastewater discharged from households and other wastewater types discharged to the drainage system.  Total amount of wastewater discharged from households shall be determined according to Article 39 of the Government’s Decree No. 80/2014/ND-CP dated August 06, 2014. If households that use clean water supplied from the centralized water supply system install wastewater flow meters, the amounts of wastewater discharged from such households shall be determined according to the readings of such wastewater flow meters.  Households discharging wastewater (except domestic wastewater) are encouraged to install wastewater flow meters.

The amounts of other water types such as rain-water, other wastewater, etc. shall be determined and calculated according to applicable technical regulations/ standards.  In which, the amount of rain-water discharged from the general drainage system shall be determined according to applicable technical regulations and standards on osmosis levels and the average rainfall.

2. The drainage service price is calculated by adopting the following formula:

G_DVTN= {Z_TB+ (Z_TBx P)} (2)

Where:

G_DVTN: The drainage service price;

Z_TB: The average prime cost of the drainage service per 01 m³of wastewater;

P: The estimated profit which shall not exceed 5% of the prime cost of the drainage service;

3. The drainage service price payable by the household discharging wastewater (except domestic wastewater) to the drainage service provider is determined by the formula (2) multiplied by the K coefficient.

The K coefficient is the adjustment coefficient of pollutants content which is determined according to the contents of pollutants in the wastewater (excluding domestic wastewater) and the average COD (mg/l) in the wastewater measured at the wastewater discharge point where wastewater generated by each household is discharged into the drainage system.  COD content is determined according to the analytical results of an accredited laboratory.  The coefficient K is determined as follows:

4. The drainage service price determined by adopting the formula provided in Clause 2 of this Article excludes value-added tax (VAT).

Article 4. Method for determining total cost of drainage service

1. Reasonable costs of the drainage service include:

2. Each cost item is determined as follows:

a) Direct material cost (C_VT) includes costs of all materials directly used for maintaining the drainage system and treating the wastewater; the cost of materials of a type is calculated by multiplying the total quantity of such type of materials by the unit price thereof. In which:

- The quantity of materials of a type used for maintaining the drainage system and treating wastewater is determined according to relevant technical regulations/ standards and/or technical - economic norms of materials used for maintenance of drainage systems and wastewater treatment promulgated or announced by competent authorities.

- The unit price of material is the actual price of material supplied to the location of the provider of drainage and wastewater treatment service, which must be conformable with standards, type and quality of that type of materials used as well as the current market price, and specified in the price quotation or sales invoice in accordance with the law regulations applicable at the time of preparing the pricing plan.

b) Direct labor cost (C_NC) includes cash payments made by the drainage service provider to direct workers such as salaries, wages, and salary allowances, other allowances (if any), social insurance, health insurance and unemployment insurance premiums payable, union dues and other amounts payable in association with workers who directly perform the wastewater treatment and drainage system maintenance duties. In which:

- The salary and wage cost is calculated by multiplying the number of working days, which is determined according to the standard number of direct workers for fulfilling drainage system maintenance and wastewater treatment tasks promulgated or announced by competent authorities, by the corresponding salary or wage amount per day. The salary or wage amount per day of a worker who directly engages in the provision of the drainage service shall be determined according to specific decision of a competent authority (the Ministry of Labour, War Invalids and Social Affairs or the Provincial-level People s Committee), and include the statutory pay and salary-based allowances as regulated by law.

- The cost of social insurance, health insurance and unemployment insurance premiums, union dues and other amounts payable in association with workers who directly engage in the provision of the drainage service shall be determined in accordance with applicable law regulations (including amounts paid by the enterprise).

c) Direct machinery and equipment cost (C_M) is determined according to the machinery and equipment-shift rate, and regulations on management, utilization and depreciation of machinery and equipment adopted by the Ministry of Finance. The machinery and equipment-shift rate shall be determined according to the Ministry of Construction s guidelines and relevant regulations.

If the cost of depreciation of machinery and equipment directly used for maintaining the drainage system and treating wastewater is calculated in this clause (C_M), it shall not be taken into account when calculating the manufacturing overhead.

d) Manufacturing overhead (C_SXC) includes indirect costs (other than direct costs of materials, workers, machinery and equipment specified in Point a, Point b and Point c Clause 2 of this Article) incurred by the provider of the drainage service, consisting of:  costs of depreciation, maintenance and repair of fixed assets (other than direct machinery and equipment), costs of indirect factory supplies and materials, salaries, wages, salary allowances, social insurance, health insurance and unemployment insurance premiums, and union dues of supervisors and workers in the factory (including amounts paid by the enterprise), costs of treating sewage sludge and maintaining green space of the wastewater treatment plant (if any), costs of testing wastewater before and after the wastewater treatment, wastewater discharge systems, costs of outsourcing services and other cash expenses which must be taken into account when calculating the prime cost as prescribed by laws.

The costs of materials and workers included in the manufacturing overhead are determined in accordance with regulations laid down in Point a, Point b Clause 2 of this Article.

The cost of depreciation of fixed assets is determined in accordance with the Ministry of Finance’s regulations on management, utilization and depreciation of fixed assets.  With regard to fixed assets such as parts of the drainage system of which the investment costs cannot be determined, the plan for pricing of drainage system maintenance and wastewater treatment service shall be formulated in accordance with the Ministry of Finance’s regulations on management, utilization and depreciation of fixed assets for determining the book value and remaining value of the fixed asset which shall be used as the basis for calculating depreciation cost thereof.

The manufacturing overhead shall include all cost items as specified above but not exceed:

- 25% of the direct labor cost (C_NC) in case of the drainage system maintenance service; or

- 15% of the direct cost (including direct costs of materials, workers, machinery and equipment) in case of the wastewater treatment service.

dd) General and administrative expenses (C_q) include necessary costs for maintaining operations of the management and executive board of the enterprise providing the drainage service, and all expenses in general for the entire enterprise such as costs of depreciation and repair of fixed assets in service of the enterprise’s management and executive board, salaries, wages and salary allowances, social insurance, health insurance and unemployment insurance premiums, union dues of members of the management and executive board (including amounts paid by the enterprise), costs of materials, office stationery, taxes, fees and charges, outsourcing services serving the enterprise s office, other general expenses for the entire enterprise such as loan interests, provisions for devaluation of inventories, provisions for doubtful debts, costs of reception, transactions, scientific researches, technology research and innovation, costs of developing initiatives and innovation, costs of environmental protection, costs of training and healthcare services rendered for the enterprise’s employees, costs for female workers, and other expenses classified as general and administrative expenses as prescribed by applicable law regulations.

The costs of materials, labor and depreciation of fixed assets included in the general and administrative expenses are determined in accordance with regulations laid down in Point a, Point b, Point c Clause 2 of this Article.

The general and administrative expenses shall include all costs and expenses specified above but not exceed 5% of total manufacturing cost (C_p).

3. When calculating total cost of the drainage service, the drainage service provider must accurately and sufficiently calculate reasonable and legitimate costs actually incurred, and must exclude costs which cannot be aggregated in total cost of the drainage service in accordance with the Ministry of Finance’s guidance on general methods for determining prices of goods and services, and relevant laws.

If an enterprise engages in various business sectors in addition to the drainage service, it is required to calculate the manufacturing overhead, and the general and administrative expenses separately for the drainage service rendered in the calculating period in accordance with regulations of the law on accounting and relevant laws.

4. In case technical – economic norms on levels of costs of materials, labor, machinery and equipment announced or promulgated by competent authorities are not available, the enterprise preparing the drainage service pricing plan shall take charge of determining the levels of costs of materials, labor, machinery and equipment in an appropriate manner, and then submit a report thereof to the Provincial-level People’s Committee for approval for using as the basis for determining direct costs of materials, labor, machinery and equipment in the drainage service cost.

Article 5. Implementation organization

1. The entities in charge of calculating drainage service prices, and the power to appraise and give approval thereof shall comply with regulations laid down in Article 41 of the Government’s Decree No. 80/2014/ND-CP dated August 06, 2014.

2. The Ministry of Construction shall play the leading role, instruct and inspect the formulation of drainage service pricing plans and the implementation of regulations on management of drainage service prices.

3. Each Provincial-level People’s Committee shall:

- Perform the state management of the drainage and treatment of wastewater in that province or city; decide households that must pay drainage service costs in that province or city, cost amounts payable and roadmap for collecting charges from drainage service users in conformity with characteristics or features of each drainage system, specific social and economic conditions as well as the balancing ability of the local government budget in each period;

- Submit relevant norms, unit prices and drainage service prices announced or promulgated to the Ministry of Construction for management.

4. In case drainage service contracts are concluded before the effective date of this Circular and drainage services are being rendered, drainage service costs shall be determined according to terms and conditions of the signed drainage service contracts.  With regard to drainage service contracts which are concluded before the effective date of this Circular but drainage services is not yet rendered, parties of the signed contract shall consider adjusting contents of the signed contract in conformity with regulations herein.

Article 6. Effect

This Circular takes effect on February 15, 2019 and supersedes the Circular No. 02/2015/TT-BXD dated April 02, 2015 by the Minister of Construction.

For the Minister

The Deputy Minister

Nguyen Dinh Toan