[Objective] In order to prevent water quality deterioration due to the financial constraint and to provide scientific support for government decision, it is necessary to define the primary cost compensation standard for water transfer. [Methods] The principal component analysis and the cost substitution method was used. Because of the cost dispersion of substitute industry in underdeveloped areas, this paper used expected profit instead of opportunity cost. [Results] The primary water protection cost in Ankang City of Shaanxi Province was 1.85×10⁹ yuan in middle route of South-to-North water transfer project, but the economic compensation from the central government account for only 50%. [Conclusion] The central government should provide more compensation in order to prevent the deterioration of water quality.