One of the country's biggest economic think tanks is suggesting the government introduce a bidding system and independent auditors to help set the prices of public utilities.

Beijing-based Unirule Institute of Economics made the recommendation at a two-day forum on public utilities that ended yesterday in Shanghai.

Currently, when state-owned companies try to increase prices, many consumers have spoken out forcefully .

"Since most public utilities are currently monopolized by state-owned companies, prices can not be determined by market competition," said Sheng Hong, director of Unirule Institute of Economics.

He claimed that some state-owned companies exaggerate their costs in order to raise prices and generate higher profits.

"Under such circumstances, independent accountants are needed to audit companies to obtain accurate information about costs," Sheng said.

The government sets prices for public utilities in China based on information provided by state-owned suppliers. Since 1998, government regulators must hold hearings to listen to the views of consumers before any price increase.

"We can afford the current prices for water, electricity and coal gas," said Guo Duanying, a middle-aged Shanghai resident who works for a state-owned company. "But we are not happy to see increasing prices."

This year, consumers in Nanjing argued loudly to stop the city government from raising the prices of water and gas.

In August, the water company in the capital city of Jiangsu Province proposed increasing prices by 0.595 yuan (7.2 US cents) a cubic meter within the following three years.

Most of the participants at a hearing on the issue refused to accept the pro-posal and said the increase was too rapid.

One solution for such a deadlock might be a bidding system, Sheng said.

"When a government grants a company the right to provide a public utility, it should pick the firm that can offer the lowest price," Sheng suggested yesterday.

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