Federal govt delays release of telecom development funds

The federal government has withheld approximately Rs60 billion collected from telecom operators for the Universal Service Fund (USF), jeopardizing telecom development projects in unserved, underserved, rural, and remote areas.

The USF is intended to provide access to telecommunication services for underprivileged sections of society and remote areas. Telecom operators contribute 1.5% of their annual income to the USF and 0.5% to the R&D fund. 

However, as per a news report, the federal government moved these funds to the Federal Consolidated Fund, leading telecom companies to challenge the decision. Since 2013, these funds have not been utilised, endangering USF operations.

Following intervention by the Special Investment Facilitation Council (SIFC) and the Prime Minister, the government transferred Rs11 billion to the USF. Currently, the government holds Rs51.49 billion for the USF and Rs9.152 billion for the Research and Development (R&D) fund.

The Ministry of Information Technology and Telecommunication (MoITT) informed the Economic Coordination Committee (ECC) that the USF and R&D fund were established under the Pakistan Telecommunication (Re-Organisation) Act 1996. 

In June 2013, Rs62.003 billion from the USF and Rs5.622 billion from the R&D fund were transferred to the Federal Consolidated Fund. Only Rs4.793 billion and Rs1.470 billion were returned during the 2013-14 fiscal year. 

For FY25, Rs5.72 billion has been allocated from the USF, and Rs5 billion from the R&D fund has been used for the Digital Information Infrastructure Initiative.

The Supreme Court ruled on December 22, 2015, that the transfer of funds was ultra vires and instructed the finance ministry to release the USF and R&D funds to the respective companies promptly.

The MoITT noted that since 2013, the USF has managed its affairs with annual contributions from telecom operators, but current funds are insufficient for FY25 budgetary requirements, putting ongoing development projects at risk. 

In line with the SIFC decision, the ministry requested the release of the USF and R&D funds to continue mandated programs per the PTA Act 1996.

The Finance Division has agreed to return Rs11.13 billion to the USF from anticipated savings in FY24, pending cabinet approval.