Breaking: Over Rs. 50 Billion of Universal Service Fund Transferred to Government Kitty

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USF1Newly elected government has shocked the telecom industry by moving over Rs. 50 billion of Universal Service Fund to Ministry of Finance to pay off circular debts.

Sources familiar with the matter said that Economic Coordination Committee (ECC) has decided to shift all the money from Universal Service Fund accounts to Ministry of Finance to pay off debts, primarily to resolve energy crisis.

Sources said that – theoretically –  Universal Service Fund will be able to get the money back from Ministry of Finance when and if it ever requires.

Experts, on other hands, consider this is a theft from telecom industry and that USF money – which telecom operators pay for the development of telecom service in far-flung areas of Pakistan – will never be recovered. They said that disbursements of funds to USF will take ages due to tiring procedural requirements in the government sector.

It merits mentioning here that previous government had also considered moving the USF money to National Consolidated Fund.

It maybe recalled that USF money, which is over Rs. 50 billion now, is collected from telecom operators equalling 1.5 percent of their yearly revenues. This money is then used by the USF to deploy telecom services in far-flung and rural areas of the country by subsidizing the infrastructure.

Telecom companies are likely to react on the move and possibility for challenging the decision in courts can’t be ruled out.

It maybe recalled that ISPAK (Internet Service Providers Association of Pakistan) last year urged telecom operators to not to pay USF share due to government’s inaction in resolving the managerial issues USF was having then.

Universal Service Fund is almost dysfunctional for last one year at least. Fund is without any CEO for last 8 months and government has just recently advertised the job, which is likely to be taken up by someone close to the government.

Universal Service Fund – since its inception in 2007 – has so far disbursed over Rs. 21 billion for the deployment of cellular, broadband internet, fibre optic and other telecom services. Details of USF project are as following:

USF Achievements

  • Rural Telecom Program
    • Contracted: 6,410 locations
    • Completed: 3,810 locations
    • pending but audited: 3,760 locations
    • advertised: 102 locations
  • Broadband Program
    • Contracted: 337 towns
    • completed: 260 towns
    • Advertised: 122 towns
    • Broadband Connections in USF subsidized towns: 491,250 (around 20 percent of total penetration)
    • Educational Broadband Centers: 1,298
  • Optic Fibre Program
    • Contracted: 6,703 kms
    • Completed: 4,258 kms
    • Audited: 2,886 kms
    • Advertised: 172 kms
    • Tehsil HQ’s + Towns connected: 102

Considering the recent track record and ongoing tone of the government, especially after imposing 5 percent withholding tax on cellular services, it appears that PML(N) is all set to bury the telecom industry.

Tech and telecom reporter for over 15 years

  • When PPP Government wanted to do this there was lot of hue and cry.But now so quietly the task is achieved.
    Any how provision of electricity is more vital than telecom for both rural and urban areas.

  • Just got the news that Govt. had paid 326 billions for circular debts. Good move ! Telecom sector already doing really well by grilling and looting the people of Pakistan so it doesn’t matter if they don’t get these USF funds for a while.. so, nation doesn’t need to be panic anyways. Cheers !

    • Circular debt at the end of Fiscal Year (FY) 2011 was estimated to be Rs. 537 billion. At the end of FY 2012 it was estimated to be Rs.872 billion. So in last single fiscal year the circular debt was 335 billion.

      The primary causes of circular debt, as highlighted by the Planning Commission of Pakistan, include:

      – Poor governance
      – Delays in tariff determination by an inadequately empowered regulator compounded by interference and delay in notification by the Government of Pakistan (GOP)
      – A fuel price methodology that delays infusion of cash to the power sector
      – Poor revenue collection by the DISCOs
      – Delayed and incomplete payment by the Ministry of Finance (MOF) on Tariff Differential Subsidy (TDS) and Karachi Electric Supply Company (KESC) contract payments
      – Prolonged stays on fuel price adjustments (FPAs) granted by the courts
      -Transmission and distribution (T&D) losses and theft.

      Can you explain how, without removing above mentioned short comings of government entities associated with power sector, injecting the funds of other entities, which are performing well, going to solve the problem.

      One thing is for sure, by the time you have cleared off the circular debt, many institutions will banish to oblivion and then government will be adjusting its priority to recover them again and so on……

      For source please follow the link,%202013.pdf

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