Gas price hike.

THE government needs to carefully consider the determination by Ogra that a new round of gas price increases is required. The trade-offs involved are powerful and the decision requires careful consideration. The price increase is being sought mainly to help meet the costs of the two gas distribution companies, unlike instances when capital costs and future investment plans were also part of the proposed price hike. So long as the price hike is not entertained, both companies - the SSGC and SNGPL - will have reason to argue that they are operating under severe liquidity constraints, and their line ministry will be burdened with all manner of complaints, such as rising line losses due to lack of maintenance and poor recoveries. On the other hand, if the price hike is entertained expeditiously, it will drive inflation at a time when the monthly average is already rising faster than expected. The burden on the common citizenry is already very high; further increases in inflation will also negatively impact the interest rate environment at a time when the business community is keenly anticipating a rate cut before the summer of 2020.

The trade-off is there not only in the case of gas but also power prices, where the government is being urged by its donors to...