"The punishment should be calculated from the day that factory is found guilty of pollution discharge until the day its emissions meet environmental protection requirements," Mao Rubai, chairman of the Environmental and Resources Protection Committee of the National People's Congress (NPC), said in a recent news briefing.

Revision of the Clean Water Act, which took effect from 1984, is under discussion, and the NPC has said it will change the penalty system. The question is how.

The current feeling among industries is that as the penalty has a cap, it's cheaper to pay the fine than correct the pollution problem.

If the cap is removed, Mao said, "the factories (will) fully realize the importance of abiding by environmental protection law."

A joint study by the Environmental Enforcement Bureau under the State Environmental Protection Administration (SEPA) and the Beijing office of the US-based Environmental Defence supported Mao's stand.

The study, launched in last March, took samples from the wastewater treatment operations of 200 factories. It concluded that the daily penalty could be set at about 40,000 yuan (US$5,000), a median charge severe enough to change polluters' behaviour.

"Our study shows that the upper limit could be as high as 100,000 yuan (US$12,500) per day, if economic growth is factored in," Environmental Defence spokesman Qin Hu said.

In the United States, the punishment is fixed at US$25,000 per day.

Under normal circumstances, once the fines against an environmental troublemaker reach 200,000 yuan (US$25,000), it does not have to pay any more. But all a factory has to do is stop treating wastewater for about five days to save the 40,000 yuan (US$5,000) a day to pay the fine.

However, SEPA may raise the fine cap to 1 million yuan (US$125,000) if the pollution has caused serious enough environmental damage and economic loss.

"As calculating the economic loss is always difficult, the penalty usually stays at 200,000 yuan (US$25,000)," said Lin Hong, a senior researcher from the Chinese Research Academy of Environmental Science and a member of the joint SEPA-Environmental Defence study team.

To date, only one factory has been fined 1 million yuan. The Sichuan General Chemical Group's No 2 chemical fertilizer plant polluted the Tuojiang River in Southwest China in 2004, causing the deaths of more than 500,000 kilograms of fish and leaving more than 1 million loacal residents unable to use the water for nearly a month.

Qin said changing to a daily penalty "will not only solve the current problem, but also address the concern of repetitive law-breaking."

"With Mao's comment, we have more confidence than before that this new accumulated penalty structure will be integrated into the amendments," he said.

Bie Tao, deputy director of SEPA's department of politics, laws and regulation, said two other matters are also under discussion for the amendment: who should issue water pollution discharge permits and the definitions of the functions of water areas, based on what the water is used for.