Cabinet extends Rs 2.3b benefit to fixed line telecom companies

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STAFF REPORT IBD: The government of Pakistan has reportedly extended a financial benefit of Rs 2.3 billion to as many as ten local fixed line telecom companies in Pakistan by waiving off this amount, these companies have already received from their customers in the name of research and development tax and were unwillingly to deposit it with the national kitty for the last four years.
The federal cabinet, which recently met under the chair of Prime Minister Syed Yosuf Raza Gilani, took this decision on the recommendations of ministerial committee, headed by Minister for Kashmir Affairs and Gligit Baltistan, Mian Manzoor Ahmad Wattoo.
It is to be mentioned here that this waived off fund has already been charged by the telecom companies from their customers.
The documents disclose that a summary dated July 9, 2011 was submitted by the Ministry of Information Technology on “equal treatment for contribution in the Research and Development Fund for fixed line operators”. The cabinet referred the issue to the already constituted committee.
The de-regulation policy 2003 required all fixed line licences to pay RandD fund contribution at one per cent of their gross revenue minus some mandatory deductions. Subsequently, the cabinet, in its meeting held on June 28, 2004 had approved the RandD fund contribution in respect of mobile cellular operators at 0.5 per cent whereas, fund contribution for fixed line operators remained unchanged. Hence, two different rates for telecom services providers created an anomaly.
On the presentation to remove this discrimination, the Ministry of IT initiated a summary for the cabinet recommending a uniform rate of 0.5 per cent, RandD contribution for both mobile and fixed line licencees.
The cabinet had considered the summary in its meeting held on February 18, 2009 and decided to constitute a committee to comprehensively review the matter in the light of the decision in the cabinet and present its recommendations in the next meeting of the cabinet.
The committee held several meetings and its recommendations were presented before the cabinet in its meeting held on November 18, 2009. The cabinet approved the proposal i.e. reduction RandD fund from 1 per cent to 0.5 per cent with immediate effect.
In view of the approval of the cabinet, the IT Ministry issued the policy directives to PTA conveying the decision of the cabinet to be effective from the date of cabinet decision i.e. November 18, 2009. However, fixed line operators resented the date of implementation of the decision and demanded that the decision should be enforced not from “immediate effect” but “retrospectively” i.e. January 2004 on the grounds that the anomaly which has been rectified needs to be implemented from the date of issuance of the policy rather than future application.
The meeting of the committee was held on October 17, 2011 decided “since the differential in RandD fund contribution rates was created in January 2004 with the approval of cellular mobile policy, the new rate of 0.5 per cent of the annual gross revenue for the fixed line operators already approved by the cabinet, will be given effect from the same date i.e. January 2004”.
It is to be mentioned here that the IT ministry is currently being headed by Prime Minister Syed Yosuf Raza Gilani, who hardly spends any time in looking after the affairs of the ministry. The government by no means is in a position to afford such big loss especially at a time when the Etisalate has delayed or unwilling to pay about $800 million outstanding amount for purchasing 26 per cent shares as well as management rights of the state-run PTCL.


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