Labour rights group Jerit has rejected the government's assurance that low-income consumers will be unaffected by the 12 percent increase in electricity tariff which takes effect on June 1.

Its secretary S Madhavi said there is nothing to stop the 'domino effect' caused by the tariff hike to the cost of living which is already at an alarming high following the increase of fuel price on Feb 28 this year.

She said the manufacturers cannot be stopped from increasing the price of goods due to the tariff hike as it will give rise to the cost of production and effectively decreases profit margin.

"The free trade system allows the companies to transfer the burden to the consumers by increasing the price of goods in order to maintain their profit margin. This is the same cycle that was seen when the fuel price was increased in February where consumers end up facing the brunt," she said in a statement today.

Energy, Water and Communications Minister Dr Lim Keng Yaik said some 60 percent or 3.036 million of the 5.1 million households in the peninsula are not affected by the hike imposed by Tenaga Nasional Berhad (TNB).

He said almost one million households who use up to 300 kWh of electricity per month and pay between RM44 and RM70 would experience a minimal monthly increase of between 3 sen and RM3.10.

Madhavi said that the government's green light to TNB will only do good to the corporate sector and the capitalists while the people continue to struggle with the escalating cost of living.

"What hurts us even more is to hear the government telling us to be more prudent in our lifestyle. It is funny that such advice comes from a government which has wasted millions of ringgit to fund mega projects listed at the recent Ninth Malaysian Plan."

She urged the government to stop making justifications on the price increase as they no longer hold any value to the people.

"We must not continue to be silent on this system that exploits its people. We must make changes to ensure a better future for the next generation. We must stand up against the increase of electricity tariff."

Upset manufacturers

Jerit is expected to take part in the fuel and power hike protest on Sunday outside the Petronas Twin Tower where some 2,000 people are expected to participate.

Meanwhile, the tariff hike also hit a sour note with the Federation of Malaysian Manufacturers (FMM) which expressed its disappointment as the manufacturing sector would pay 12.4 to 14.5 percent more.

It stated that the new tariff structure clearly penalised industries that were energy intensive.

"FMM would like to state categorically that being energy intensive does not mean these industries are inefficient energy guzzlers. These industries are strategic and critical industries having competitive edge; helping TNB optimises utilisation of electricity."

The new tariff structure also does not support demand side management strategies to even out loading over a 24-hour period through preferential rates for use of electricity during off-peak hours, it claimed.

FMM also estimated that profit margins could be reduced by as much as one percent to three percent for highly intensive industries, and at least by 0.5 percent to one percent for other industries.

"These percentages are significant because manufacturing companies generally record profit margins of only three percent to five percent."

What is more important, it added, is that the national economic competitiveness in relation to manufacturing would be affected as there would be loss of competitiveness of exports.

"Exporters are now hit doubly hard in their price competitiveness with rapid increase of operation costs."

Unattractive to investments

Malaysia would also be uncompetitive and unattractive to investments as compared to the neighbouring countries in terms of electricity cost.

This is the new average electricity selling price at 26 sen per kWh would be among the highest in the region as compared to Indonesia's 24.6 sen and Burma's 14.4 sen.

"This is despite the fact that Malaysia is a net exporter of energy fuels (oil and gas) but is unable to leverage on its own energy cost compartive advantage to help its own inductry."

FMM reiterated its view that the tariff increase could be avoided by expediting the re-negotiations of TNB-Independent Power Producers (IPP) contracts.