ISLAMABAD: The new budget has imposed several duties and taxes on the telecom sector, which is likely to restrict several development projects related to the growth of telephony, internet services, and mobile set manufacturing in the country.

The federal budget, which was unveiled here on Friday, raised the regulatory duty (RD) on optical fibre cable imports from 10 per cent to 20pc in the hopes of encouraging local manufacturing of the high-tech cables.

However, industry players have expressed concerns that it would hit the fibreisation plans of the private sector as well as the government-led Universal Support Fund (USF) programmes.

“There is a need for localisation of all backend industry, including various kinds of cables, but manufacturing takes time and ongoing projects by all the IT and telecom companies to lay fibre optic cable across the country will become costly,” said a senior official of Jazz Pakistan.

Another significant change in the sector’s taxation regime was the increase in sales tax on the import of completely knocked down (CKD) kits for mobile devices exceeding $100 in value from Rs 10 per set to 10pc of their value.

However, the industry has pointed out that sales tax at completely-built-up units (CBU) was Rs1,680 per set, whereas the sales tax at completely and semi-knocked-down (SKD) kits will be around Rs4,000 at the rate of 10pc for phones valued at $200.

“This will encourage under-invoicing and imports of phone sets of up to $200,” said Zeeshan Miannoor, vice president of the All Pakistan Mobile Phones Association.

He also stated that 80pc of the sets sold are between $100 and $200.

The total budget of the Ministry of IT and Telecom has been enhanced to Rs8.04 billion for the next fiscal year. The original allocation for the ministry in the outgoing fiscal 2021-22 was Rs5.87bn, but due to enhanced operating expenses of the ministry, the total expenditures incurred were Rs8.77bn.

The key projects launched during the outgoing fiscal year were the implementation of Digital Pakistan, which was initiated by former prime minister Imran Khan, and e-governance.

The budge of the state-owned telecom company Special Communication Organisation (SCO) has been enhanced to Rs4.51bn against the allocation of Rs3.36bn at the start of the outgoing fiscal 2021-22.

However, the SCO, like other entities under the ministry, spent Rs 4.12 billion on massive upgrade programs, including the purchase of additional spectrum from the PTA and infrastructure development.

As the development project will move further in the next fiscal year, the operating expenses of SCO have been enhanced to Rs1.14bn against Rs802.43bn in the last fiscal.

The budget of the National Information Technology Board (NITB) has been increased to Rs1.40bn from Rs1.30bn, with a significant jump in the operating expense of the Board from Rs543.49 million to Rs827.47m in 2022-23.

At the same time, the government seems to be planning to offload the Telephone Industries of Pakistan (TIP) as there was no allocation in this head and in the budget of the outgoing fiscal year, Rs500m was allocated in terms of salaries of officers and staff of the non-functioning unit.

Published in Dawn,June 11th, 2022