Celcos to Pay 0.5 % of Gross Revenue to R&D Fund

The government has decided to make it mandatory for cellular phone companies to contribute 0.5 percent of their gross revenue as research and development (R&D) fund as is already being contributed by the fixed line companies like Pakistan Telecommunication Company Limited (PTCL), reported Business Recorder, citing sources close to Privatization Minister.

“Uniform rate of R&D contribution of 0.5 percent is being approved for all fixed line and cellular operators as this will maintain the spirit of fixed line policy 2003 which states that none of the licensees be at any position of disadvantage,” sources said.

The Cabinet in its meeting on February 18, 2009 had considered the summary on equal treatment for contribution in research & development (R&D) fund for fixed line and mobile operators and had constituted a committee comprising Minister for Information, Minister for Privatisation, Minister for Industries and Production, Minister for Science and Technology, Minister for Interior and Prime Minister’s Special Assistant on Social Sector.

In the summary, the Ministry of Information Technology (IT& Telecom Division) had stated that under the de-regulation policy 2003, approved by the Cabinet, all fixed licencees are required to pay R&D fund contribution at 1 percent of their gross revenue minus mandatory deduction. Later, the Cabinet in its meeting on January 28, 2004 approved R&D contribution in respect of cellular mobile operators at 0.5 percent. The two rates for two different service providers created an anomaly which required redressal on the basis of equity and fairness.

The committee held several meetings to discuss the issues that were deliberated and discussed in the Cabinet meeting which were twofold:

  • gainful utilisation of ICT R&D fund; and
  • the issue of providing level playing field and equal treatment for contribution in R&D fund for fixed line and mobile operators.

After exhaustive discussions, it was resolved by the committee that R&D fund could not be utilised in areas other than ones in its charter. However, Ministries of Science and Technology and Information Technology were requested to hold separate meetings to examine the possibility of provision of funds for research projects being undertaken under the aegis of the Ministry of Science and Technology.

On the issue of equal treatment for contribution in R&D fund by fixed line and cellular mobile operators the committee was of the unanimous view that all stakeholders/service providers should be provided level playing field and there should be a uniform rate of R&D fund levy for fixed operators–from 1 percent to 0.5 percent of annual gross revenues as in the case of cellular mobile operators.

Giving the details, sources said that in view of the importance of the indigenous development of information and communication technology and human resources, provisions for contribution for R&D fund was made in the De-regulation Policy 2003, approved by the Cabinet. The policy required all fixed line licencees to provide R&D fund contribution @ 1 percent of gross revenue, minus inter-operator and related Pakistan Telecommunication Authority (PTA)/Frequency Allocation Board (FAB) mandated payments.

In addition, clause 7.2 of the fixed line de-regulation policy highlights that the same treatment be given to cellular operators as well, while formulating Cellular Policy. Clause 7.2 of fixed line policy, reads as, “Under proposed new policy framework, in order to ensure that fixed line telephone licencees are not placed in a position of disadvantage, the cellular licencees would also be required to contribute toward R&D and Universal Service Fund (USF) in the same manner as fixed line licencees”. Similar treatment was given to fixed line licencees and cellular operators in the case of USF. Licencees were required to pay 1.5 percent of their adjusted gross revenues in the USF.

The cellular mobile policy, prepared and later approved by the Cabinet in its meeting on 28th January 2004 stated: “R&D contribution would be @ 0.5 percent of gross revenue minus inter-operator and related PTA/FAB mandated payments to the R&D fund”. This contribution percentage was based on the rationale of fast anticipated growth in cellular wireless sector. However, along with this lower contribution by cellular operators the percentage reduction in proportionate contribution by fixed line licencees did not get their attention.

Resultantly, an anomaly in contribution of R&D fund for fixed line licencees cropped up, raised by Pakistan Telecommunication Company Limited (PTCL) and PTA. In view of requests of PTCL and PTA, the Ministry of Information and Technology, a case was initiated for introduction of uniform rate of 0.5 percent for cellular as well as fixed line operators, sources saidd

The President of PTCL also held a meeting with Minister for Investment Waqar Ahmad Khan and raised the issue of disparity in R&D contributions between the fixed and cellular operators. Ministry of Investment referred the case to Ministry of Information Technology (MolT) with the observation that the case of PTCL required immediate attention for its resolution and provision of uniform treatment in connection with the R&D contribution. Investment Ministry also urged MoIT to initiate immediate measures to have uniform policies.

The Ministry of Information Technology has submitted a summary to the Cabinet, proposing that the Cabinet should consider uniform R&D contribution of 0.5 percent for all fixed line and cellular operators to maintain the spirit of para 7.2 of fixed line policy 2003 which envisages that none of the licencees be at any disadvantage.

Sources said that after approval by the Cabinet, which is scheduled to meet on November 18, 2009, fixed line de-regulation policy clause 4.2.3.5 LL licencees will devote 0.5 percent of gross revenue minus inter-operator and related PTA/ FAB mandated payments to national ICT R&D fund. The existing licencees will be offered the new rate with immediate effect,” sources added.

Via Business Recorder

Update: Fixed line, cellphone companies to be treated equally

To provide level playing field to private sector in the telecom sector, the Federal Cabinet has accorded approval for equal treatment to both fixed line and cellular operators. The Cabinet meeting, chaired by Prime Minister Syed Yousuf Raza Gilani on Wednesday, directed the Ministry of Information Technology to submit a proposal to the Prime Minister for the decision regarding funds utilisation.

The cell companies, like fixed line operators, will now contribute after the Cabinet approval 0.5 of their gross revenue for research and development fund. The Cabinet directed the Ministry of Women Development to ensure that its actions for women’s welfare and empowerment are pursued on fast track basis.

The ministry gave a presentation to the Cabinet on its activities and plans, and highlighted the broad range of achievements under the democratic government, development projects for women’s empowerment, fiscal and legal reforms, as well as policies and future plans.

The Cabinet was informed that the primary objective of the ministry is to bring about improvement and change in the lives of women population of Pakistan through gender mainstreaming, good governance and elimination of all forms of discrimination against women and to reduce the vulnerabilities of women by changing the mindset of the society through advocacy, awareness, education and gender balanced policies and programmes.

The meeting was informed that from January 21 to October 20, 2009, the Cabinet held 20 meetings in which 167 decisions were made, out of which 130 had so far been implemented, while 37 were under-implementation. The Prime Minister directed all the committees and the ministries to ensure implementation of all the decisions of the Cabinet and submit their reports at the earliest.

It was observed that all the ministries and organisations of the government were engaged in developmental and welfare activities, which were not reported and disseminated to the general public – the target beneficiary. The Cabinet, therefore, decided that public outreach exercise must be carried out to share the government activities and initiatives with the general public through press and media.

The Cabinet also took notice of the complaints regarding paddy procurement, and decided to constitute a high level committee, under the chairmanship of the Prime Minister, to review the implementation status. In the meantime, the Prime Minister directed all concerned to ensure compliance of the previous Cabinet decision regarding paddy procurement.

The Cabinet granted ex-post facto approval of various memorandums of understanding (MoUs) signed by Pakistan with China for water resource management, implementation of Kohala hydropower project and technical co-operation. While granting ex-post facto approval to the signing of MoU with the government of the UAE on child camel jockeys, including facilitation in location of child jockeys and Abu Dhabi declaration, the Prime Minister constituted a committee to look into the matters concerning compensation to the affectees.

The committee will include Ministers for Overseas Pakistanis, Interior, Law and Justice, Human Rights as well as Special Assistant to the Prime Minister on Social Sector. The Cabinet approved initiation of negotiations for memorandum of co-operation between Corporation for Export Development and Promotion (KAZANEX) JSC and Trade Development Authority of Pakistan.

The memorandum is aimed at establishing a mechanism to improve competitiveness of the businesses and provide a platform for the companies of Pakistan and Kazakhstan to develop close trade relations and to increase the volume of bilateral trade, investment and technology transfer.

The Cabinet also ratified the decisions of the ECC meetings held on October 27, 2009 as well as the trade agreement between Pakistan and Yemen. It also granted approval for initiating negotiations on the draft agreement on promotion and protection of investment with Zimbabwe and for defence co-operation with Australia.

The Cabinet accorded approval to start negotiations for new bilateral investment treaty between Pakistan and Germany. It may be recalled that the first bilateral investment treaty was signed between Pakistan and Germany after Second World War on November 25, 1959, which needs to be redrafted to take into account the current requirements and environment.

The Cabinet granted permission to start negotiations with the Hashemite Kingdom of Jordon and Sultanate of Oman for entering into agreements on co-operation in the field of vocational training. The agreements aim at co-operating and exchanging expertise, legislation, studies, training programmes, etc, which will help train and upgrade vocational trainers and young people to integrate effectively in the labour market.

The Cabinet constituted a committee to further look into the details of the draft legislation, called “Small and Medium Enterprises Development Bill 2009” and to resubmit it to the Cabinet for approval. The members of the committee included the Ministers for Industries and Production, Law and Justice as well as Finance.

Via Business Recorder


  • Muhammad Zohair Chohan

    That is good step, because most of them are multinational corporations and they are transferring our nation’s money to their homelands . But the question is that how can we so sure that this R & D fund will be used for Research and Development, not for ministers personal affairs.

  • tech2blogger.com

    government take good step

  • Rizwan

    Pro- Pakistani Need to do more research before they publish such news. For every one’s information its Celco’s who are already paying 0.5% of the Gross Revenues in this fund since 2004. The question is not who is contributing in it, rather the utilization of the fund. The ICT&R&D company was formed in 2006 and we all as a public has the right to ask where the fund is being utilized. If the concept of R&D is to give Scholorships then i dont understand what is HEC doing in the country.