FE Editorial : Have money, will waste
The Financial Express: Oct 06 2012, 01:34 IST
Given that the Universal Service Obligation Fund (USOF) has R21,840 crore of funds lying unutilised, it’s not surprising the Deepak Parekh committee on infrastructure financing has found a new way to use the money since, for a cash-strapped industry, that’s pretty useful money. More so since the USOF is an unending fund as it gets 5% of all telecom revenues annually. The committee has recommended the fund be used to defray part of the monthly rentals for rural phones and perhaps even pay for the first mobile phone bought. The logic given is a seemingly compelling one, that while urban teledensity is 170 (1.7 phones per person), rural teledensity is a much lower 39% (a little under 4 phones per 10 persons).
There are several problems with the argument. For one, urban teledensity is an overdone concept—it is distorted by offices that have hundreds of connections and individuals who are using multiple SIM cards to take advantage of cheaper call rates by different telcos. Two, a 39% teledensity in rural areas means most people in rural India are virtually next door to a phone—indeed, if you go by the number of rural households (160-170 mn), this could mean each household has a phone. In which case, it is better to go by what the Census showed for 2011—that 54% of rural households had a phone (48% had only mobiles) and 82% of urban households had a phone (64% had only mobiles). That means every rural household is actually next door to
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