Industrial Electricity Tariff: Nepra’s decision irks IT Minister

The Federal IT Minister and Telecom Minister, 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 tariffs.

He said in a statement, that the telecom sector has been given the status of an industry by the Government of Pakistan, and we believe that 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 toward providing better facilities to the consumer and attracting future foreign investors.

Amin said; It has always been our endeavor to handle the affairs of both the public and the stakeholders related to the IT & telecom sector in an amicable manner so that the process of construction and development can be accelerated.”

 Despite the telecom sector was declared an ‘Industry’ by the Government of Pakistan, making the sector entitled to avail industrial tariff of electricity, the National Electric Power Regulatory Authority (NEPRA) has dismissed the petitions filed by telecom companies for the revision of their power tariff from commercial to industrial.

The government’s decision to declare the telecom sector an ‘industry’ has also been endorsed by numerous ministries over the years, most recently through Finance Bill 2021 reiterating its ‘industrial’ status, yet telcos are being subjected to commercial tariffs causing an unprecedented rise in their cost of operations.

Petitions

The petitions were filed by Pakistan Telecommunication Company (PTCL), Telenor Pakistan, Pak Telecom Mobile (Ufone), Pakistan Mobile Communication Ltd. (Jazz), and Deodar whereas CM Pak (Zong), Ministry of Energy, K-Electric, CPPA-G participated as interveners.

The petitioners highlighted that under Article 25 of the Constitution of Pakistan, all citizens are equal before Law and are entitled to equal protection of the law.

Telecom cannot be considered as an industry only for the purposes of paying tax rather is also entitled to the corresponding benefits as well.

Currently, for paying heavy taxes it is being treated as ‘industry’, but for the purposes of tariff, it is treated otherwise. The Telecom sector is entitled to equal treatment of burden as well as benefits of the status of ‘industry’.

Telecom operators also argue that as per the eligibility criteria established through NEPRA’s own tariff determinations, any business or establishment which is undertaking value-adding activities or processing is eligible for an industrial tariff.

Each operator has been assigned radio waves by Federal Government (called spectrum), to use and provide their services. Operators set up towers, antennas, circuits, cables, and other equipment all across the country, through which they convert/switch basic radio waves into useable services (e.g. data, voice calls, SMS).

Further, in this digital age, the telecom sector has evolved into data processing, sourcing, and management which, is globally recognized as an industry.

The response from interveners such as CPPA-G, Ministry of Energy etc suggests that they still consider the telecom sector as a luxury rather than a necessity.

The Finance Division believes that telecom companies are basically involved in commercial activities and electricity cost is a pass-through item, which is incorrect because telecom companies do not pass on power tariff increases to their customers as practised in the case of power distribution companies.

Moreover, the finance division also assumes that telecom companies don’t consult their regulator the for any change in their tariff whereas the operators are required to loop in PTA for any change in tariff.

A telecom industry expert said that It is quite unfortunate that Parliament approved the industrial status for the telecom sector through the Finance Act 2021 but NEPRA refuses to pass on the benefits allowed under such classification to the telecom Industry. “The industry will chart out a legal strategy to have a review of this decision.”