The guidelines published by the National Development and Reform Commission and the Housing and Urban-Rural Development Ministry, suggest a three rate structure, charging more to homes which use more.
The structure will be based on average monthly household water consumption. The first tier applies to 80 per cent of average consumption; the second tier to 95 per cent.
The price differential between the three tiers should be no less than 2:3:6, and greater in areas where water is more scarce, the state-run Xinhua news agency reported.
China has 20 per cent of the world's population but only some seven per cent of its fresh water. Former Chinese premier Wen Jiabao once said water shortages threaten "the very survival of the Chinese nation".
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