The letter KL cheap? We don't think so... by Ronnie Liu et al is referred. I wish to point out a factual error in the above letter. Whilst using per capita income adjusted for purchasing power parity (PPP) to compare Kuala Lumpur and Oslo allows a fairer comparison, the per capita income of Malaysians should be calculated using the official exchange rate.

Malaysia's GDP on a PPP basis is US$248.7 billion but at the official exchange rate, it is US$121.2 billion. Therefore the average per capita monthly income should be (121.2/248.7 x 10,400 x 3.7/12) RM1,563 which I reckon is a more accurate figure.

The PPP figure is used to show that goods and services that would have cost RM3,207 in the US can be bought with RM1,563 in Malaysia.

Generally speaking, Malaysian consumers suffer the most when buying goods that have standard prices worldwide eg, flight tickets, genuine software, CDs and DVDs, designer goods, branded electronics, etc. These goods cost almost the same in US dollars both in the US and Malaysia but due to the lower purchasing power of the ringgit, cost relatively more for the Malaysian consumer.

But as our economy is more dependent on exports than imports, it is thus in the interests of the country to keep the ringgit relatively weak while still keeping inflation as low as possible to protect consumers.

As for the price of petrol, I agree with the writers that as a net exporter, Malaysia stands to gain when oil prices are high. The massive jump in pump prices earlier this year however, has not wreaked havoc on the economy or brought consumer spending to a standstill even though the inflation rate has increased.

I think the reason for this is that Bank Negara had accurately assessed Malaysia's ability to cushion the impact of such a move before the price increase was announced. This move will 'force' Malaysians to work harder to meet rising costs and in the process, better prepare them for the realities of a globalised economy.

Even as the third-largest oil producer, Norway's petroleum industry is diversifying as it anticipates a drop in output. There is no reason to believe that Malaysia's oil fields will not dry up one day as well. If Petronas' profits are prudently invested in diversification exercises rather than being used only for fuel subsidies, it can only be good for the country in the long run.

Am I saying then that petrol should not be subsidised given how the lower-income groups have suffered since the petrol price increase? No. Other than the current lower road tax for cheaper cars and higher road tax for luxury cars, a more equitable plan for vehicle owners comes to mind.

My idea is as follows: a tiered pricing system for petrol. An arbitrary example would be RM1.70/l for the first 10 litres, RM1.90/l for the next 20 litres, RM2.00/l for the next 30 litres and so on.

There is no reason to believe that an owner of a Mercedes-Benz S Class car would repeatedly swipe his plastic or pay at the counter for every 10 litres purchased just to benefit from the lower rate. Station attendants can be trained to monitor foul play.

The subsidy paid per litre of petrol would still be fixed as the idea of the carefully calculated price tier is to have petrol guzzlers subsidise smaller vehicles whilst not hurting the profits of the petrol stations.

A problem that comes to mind is petrol stations in rural areas that are less frequently patronised by luxury vehicles. Is this idea fair and feasible?