As the federal government holds back around Rs60 billion collected from telecom operators for the Universal Service Fund (USF), the delay in release of funds has put at stake telecom development projects in unserved, underserved, rural and remote areas of the country.

USF is meant to be utilised for providing access to telecommunication services for the underprivileged sections of society and in far-off areas. Telecommunication companies have been contributing to the fund for years with the objective of laying a telecom network.

However, the federal government shifted such funds on to the Federal Consolidated Fund, prompting telecom companies to challenge the move. Those funds have never been used since 2013 and their shortage has put USF operations at risk.

Following intervention of the SIFC and the prime minister, the federal government has transferred Rs11 billon to the USF. At this stage, the government has the total USF of Rs51.49 billion and R&D fund of Rs9.152 billion.

The Ministry of ITT informed the Economic Coordination Committee (ECC), in a recent meeting, that the USF and R&D fund had been created under the Pakistan Telecommunication (Re-Organisation) Act 1996 with the mandate to provide access to telecom services in unserved, underserved, rural and remote areas, as well as to provide grants to startups and innovative projects. Telecom operators contribute 1.5% and 0.5% of their annual income to the USF and R&D fund, respectively. In June 2013, the federal government transferred Rs62.003 billion from the USF and Rs5.622 billion from the R&D fund to the Federal Consolidated Fund. Of these, only Rs4.793 billion and Rs1.470 billion were returned to the USF and R&D fund, respectively, during fiscal year 2013-14. Now, out of the outstanding USF of Rs57.2 billion, the Finance Division has allocated Rs5.72 billion in the budget for 2024-25. Additionally, the government used Rs5 billion from the R&D fund as bridge financing for the Digital Information Infrastructure Initiative. At this stage, the government holds Rs51.49 billion in USF and Rs9.152 billion in R&D fund. It is pertinent to mention that the industry had challenged the transfer of USF to the consolidated fund via appeals and a civil petition.

The Supreme Court, in its decision on December 22, 2015, called the transfer of funds ultra vires and instructed the finance ministry to release the USF and R&D fund to the respective companies at the earliest.

The MoITT said that since 2013, the USF company had been managing its affairs out of the annual contribution received from the telecom operators. At present, funds are insufficient to cater to budgetary requirements of the company for FY25. As a result, the ongoing development projects of the USF are at stake. In line with the SIFC decision, the ministry requested that the USF and R&D fund should be released to enable companies to continue their mandated programmes as per requirements of the PTA Act 1996.

The Finance Division gave its concurrence for the return of Rs11.13 billion to the USF from the anticipated savings in FY24, subject to the approval of the cabinet.