Telcos protest exclusion from tariff relief

Express Tribune

05-04-2025

Listen to article
Telecom companies have expressed frustration and serious concerns over being excluded from the government's recently announced electricity tariff relief, citing the long-standing denial of industrial status benefits despite being declared an industry by the government in 2004.
On Thursday, Prime Minister Shehbaz Sharif announced a significant reduction in electricity rates — a Rs7.41 per unit decrease in the national average tariff and a Rs7.69 per unit cut for industries. The relief was lauded as a positive development; however, telecom companies say they have once again been left out.
Speaking to The Express Tribune, "The telecom sector was granted industry status in 2004, yet we continue to be denied the corresponding benefits," said Kamal Ahmed, Secretary General of the Telecom Operators Association (TOA).
He said the sector continues to face high operational costs due to the lack of electricity tariff reductions for its core components.
According to the association, power is one of the largest cost components for telecom operators, who must keep thousands of cell towers and data centres running round the clock. "Industrial electricity tariffs would significantly ease our operational costs," Kamal Ahmed added.
Wahaj Siraj, Co-founder and CEO of Nayatel, also voiced concern over the exclusion of the telecom sector from the electricity relief package.
"Great move to reduce electricity rates, but the telecom industry, data centres, cloud platforms, et al, don't get this rate despite being declared an industry by the government since 2004," he said on social media. He questioned how Pakistan could aspire to become an IT powerhouse when critical digital infrastructure such as data centres is deprived of industrial electricity rates.
The telecom companies lamented that despite detailed hearings at the National Electric Power Regulatory Authority (NEPRA), telecom operators and data centres are still billed at commercial rates. "There is a disconnect between policy and implementation," Ahmed maintained.
As the federal government prepares the budget for the fiscal year 2025-26, telecom companies have called for urgent tax and policy reforms to address mounting financial and regulatory challenges facing the crucial sector.
The industry has urged the government to exempt telecom companies from withholding tax obligations under the Income Tax Ordinance (ITO) 2001, describing the current system as overly complex and burdensome. "Telecom operators are utility providers managing millions of transactions daily. The current tax regime increases compliance costs and stifles growth," the TOA Secretary General said.
The industry is also seeking to reverse a change made under the Finance Act 2015, which converted adjustable withholding tax into a fixed minimum tax of 4% under Section 153(1)(b) of the ITO. This, they argue, disproportionately affects telecom companies, especially amid rising costs and high inflation. "Taxation should reflect actual earnings, not penalise compliant businesses with arbitrary fixed rates," Ahmed said.
The association has also called on the government to end coercive tax enforcement actions such as freezing bank accounts or sealing offices. These measures, it argues, should be reserved for habitual defaulters, not compliant companies.
"Tax recovery should begin only after an independent appellate tribunal reviews a case," Ahmed added.
In a bid to retain skilled talent, the TOA also urged the government to introduce targeted tax relief for telecom employees. The rising tax burden on salaries, combined with inflation, has made it harder to attract professionals to the sector.
The TOA is also advocating for the reduction of income tax under Section 236 - currently at 15%, up from 12.5% - and the rollback of the Federal Excise Duty (FED) rate from 19.5% to 16% under the Finance Act 2021.
"Lowering these rates would not reduce government revenue, but rather support digital growth and long-term economic inclusion," Ahmed said.