I read with disbelief the statement by Energy, Water and Communications Minister Lim Keng Yaik recently that the lower-income group will not be in any way affected by the proposed hike in electricity rates.

Not only is the statement without merit but it is shocking that such a statement could be made when it is totally beyond the minister's control as to whether the low-income group will be affected by the tariff increase. In fact, it is this writer's opinion that the lower-income group will be the most affected by the tariff increase which will also have the added effect of devastating the national economy.

It is obvious that the lessons of the fuel price increases and its practical effect on the price of goods and services have not been appreciated nor has much thought gone into analysing the effect of a tariff increase for usages for higher than 150kw/h. The practical effect of what will happen is as follows.

Consumers of more than 150kw/h will pay more for their electricity. Since this group of people constitute the manufacturers and service providers who are also themselves consumers, they will immediately find themselves having to pay higher electricity bills which not only would cause an increase in the cost to their businesses but would also cause a cash flow problem especially for manufacturers and industries.

The nett effect is that there would be an increase in the prices of goods and services regardless of what the minister says.

The low-income group will pay substantially more for goods and services and any savings by being spared a no-tariff hike for consumption less than 150kw/h will be totally wiped out. In fact, they would be substantially burdened in having to pay more for everything and having less disposable income.

It is obvious that the minister does not appreciate that every item in modern living is totally dependent on electricity either directly or indirectly and that food prices and the cost of any manufactured item is likely to go up in the event of a tariff hike. Employers who are heavy consumers of electricity would have to cut costs and may terminate staff as part of cost-cutting measures. This will result in spiraling inflation which will happen despite all statements and guarantees the minister gives.

It would be advisable that a study be undertaken by the Ministry of Domestic Trade and Consumer Affairs as to the likely and practical effects an increase in electricity tariff would have on the cost of goods and services.

In fact, it would be more sensible to only allow a small increase in the first tier of the tariff (less than 150kw/h per month) and not allow an increase in any other tier. Every consumer will pay a little more but there would be a lot more people paying. It is easier for a larger mass to absorb a small increase rather than a smaller mass to absorb a large increase. A smaller mass will inevitably pass a price increase onto the rest of the consumers, in particular the poor.

Finally, it is nonsense to talk about increased fuel prices being the reason for a tariff hike as 70 percent of the TNB's generating source comes from gas which is sold to TNB and the IPPs (independent power producers) at a fixed price per cubic metre well below international pricing.

It is far more productive to totally study all aspects of TNB to determine the causes of its current financial situation with a view of improving the situation through other means rather than via an increase in tariffs. I believe the country has sufficient people with the expertise to be able to do that. In fact with the right people, I believe electricity rates can actually go down.