Revision of Tariff – NEPRA Dismisses the Plea of Telecom Industry

The National Electric Power Regulatory Authority (NEPRA) has dismissed the plea of the telecom industry for revision of tariff from commercial to industrial tariff. NEPRA Authority wrote that “Value Additions” used in the definition of Industry for the purpose of applying industrial supply tariff is used in the context of value addition through manufacturing or production process.

Revision of Tariff – NEPRA Dismisses the Plea of Telecom Industry

Telecom company operators in Pakistan namely, Pakistan Telecommunication Company Limited (PTCL), Telenor Pakistan, Pak Telecom Mobile Limited (PTML), Pakistan Mobile Communication Limited (PMCL), CMPAK- Zong and Deodar Private Limited are providing mobile and broadband services benefiting 188 million subscribers of Pakistan with an annual turnover in a total of over Rs. 400 billion and creating direct and indirect jobs of 25,000 people.

• In the petition filed, the telcos reminded that in the year 2004, the Telecom sector was declared an “Industry” by the Ministry of Industries and Production. So, all CMO’s are entitled to benefit from all the concessions available to “Industry” including the Industrial tariff of electricity for its towers and exchanges but it was never granted in letter and spirit.
• Then in 2014, the government of Pakistan also endorsed the request of the Telecom Sector including Cellular Mobile Operators to be classified as an “Industrial Undertaking” under clause (b) of Section 2 (29C) of the Income Tax Ordinance, 2001.
• Now in 2021, In line with the decision of the Federal Cabinet, Government of Pakistan endorsed that all telecommunication companies operating under the license of the Pakistan Telecommunication Authority (PTA) have been specifically included in the definition of an “industrial Undertaking” by addition of clause (c) to section 2 (29C) of the Income Tax Ordinance, 2001 through the Finance Act, 2021.

CMO’s Petition and NEPRA’s Decision So far:

CMOs have filed multiple inventions with the Honorable Authority NEPRA which was in the process of determining the Uniform Tariff for DISCOs throughout Pakistan to persuade the authority on this behalf. However, it was not entertained.

CMOs again filed a separate revision of Tariff petition with the NEPRA on the merit that the Telecom sector falls under their Authority’s definition of creating value additions to the industry and it was argued that sectors of sectors are now benefiting from the connectivity that the Telecom sector has brought for the businesses.

During the hearing, Telenor in its presentation submitted the following Value Additions to National Economy by I.T Sector;

• Foreign direct investment in the Country
• Thousands of indirect/direct Jobs. creations
• Supporting GOP to fulfil governments vision of Digital Pakistan
• Achieved export target of US$2 Billion
• 2022/2023 Target fixed at US$ 3.5 Billion
• Huge potential for IT Exports estimated at US$ 20 Billion by 2030

The Telecom sector has brought foreign direct investment of over US$ 10 Billion and continues to do so in the shape of License renewal, Spectrum fees Etc.

Check Also: PTA Collaborates with Telcos to Reduce Digital Gender Gap in Pakistan

On the contrary, NEPRA Authority in their verdict wrote that “Value Additions” used in the definition of Industry for the purpose of applying industrial supply tariff is used in the context of value addition through manufacturing or production process. In case a broader meaning of the term “Value Addition” is assumed, a larger number of commercial activities will fall for the purpose of electricity tariff therefore based on this point the Authority has turned down the request of the need respite for CMO’s and the petition has been dismissed.

Similarly, the Finance Division in the matter has stated that “this Division is of the view that Telecom Companies/ Cellular Mobile Companies Operators are basically involved in commercial activities and electricity cost is a pass through item. Further, Telecom Companies/Cellular Mobile Companies Operators fixed their consumer end tariff without consulting the Regulator. Therefore, Finance Division is further of view that electricity supply to these
companies for their infrastructure units under the Category ‘4-2 Commercial” may be continued and they may not be considered for supply of electricity under the tariff category “B-2 Industrial Supply”

Ministry of IT and Telecom is in Favour of Telcos

On the other hand, the Federal IT Minister & Telecom Syed Amin Ul Haque has expressed his concern over Nepra’s decision regarding the dismissal of the petition of Telecom Companies to grant Industrial Electricity Tariff.

He believed that the Government of Pakistan has already given the status of industry to the Telecom Sector. So, it is the right of Telecom companies to get electricity tariffs at industrial rates.

When we talk about foreign investment and its extension, giving maximum incentives to companies working in Pakistan will also encourage other International Investors.

This matter is not only for the Telecom Sector but it can be an important step towards providing better facilities to the consumer and attracting future foreign investors.

Amin said; It has always been our endeavour to handle the affairs of both the Public and the Stakeholders related to the IT & Telecom sector in a pleasant manner so that the process of construction and development can be accelerated.

See Also: Telcos to Ask Govt For Reversal Of Withholding Tax On Cellular Services In New Budget