The government spends on rural connectivity projects and telecom research and development projects through the Universal Services Obligation Fund (USOF) has been estimated at Rs 19,000 crore in FY25, a 21% increase from the revised estimate of Rs 15,700 crore in FY24.

Higher spends from USOF in the last financial year and projected estimates in the current financial year assume significance given a higher Rs 79,000 crore corpus in the USOF fund.

Lately, push from telcos to abolish USOF levy till the exhaustion of the current balance has also likely prompted the government to expedite its spends from the fund. Currently, telecom operators pay 8% of their adjusted gross revenue (AGR) to the government as licence fee. Of this, 5% goes to the Digital Bharat Nidhi (previously known as USOF) and 3% goes to the general exchequer.

“Considering the huge capital that telecom service providers (TSPs) have to invest in the current scenario, especially for the deployment of 5G, COAI (Cellular Operators Association of India) recommends that the USOF levy be abolished,”it told the government as part of the Budget recommendations.

The USO fund, whose name has been changed to Digital Bharat Nidhi in the new Telecom Act, was constituted in 2003. The fund is being used to promote access to telecom services in underserved rural, remote and urban areas to bridge the digital divide. Lately, its scope has been extended to support research and development and introduction of telecom services, technologies, and products through the Telecom Technology Development Fund (TTDF).

Of the Rs 19,000 crore projected spending in FY25, the government will spend Rs 10,100 crore as compensation to telecom operators for providing connectivity in far-flung areas on the government’s direction, Rs 8,500 crore on the BharatNet project, and Rs 400 crore for telecom research, according to the Budget 2024-25 documents.

Over the next three years, owing to the Rs 1.39 trillion BharatNet phase-3 project and the BSNL 4G saturation project, submarine cable projects, among others, the spending from the USOF is expected to increase to Rs 70,000 crore, officials in the know said.

For the BharatNet project, the government has floated a Rs 65,000 crore tender, for which it is yet to receive the bids from the companies for connectivity to gram panchayats. Similarly, the 4G saturation project submarine is also yet to take off and is making slow progress.

BharatNet is one of the major components for which the funds are allocated from the USOF.

Till FY23, data suggests that the government’s BharatNet spending has been slow. In FY18, the actual expenditure was 38.5% less than the Budget estimate of Rs 10,000 crore, whereas in FY19 and FY20, the actual expenditure was 47.2% and 71.2% less than the Budget estimates of Rs 8,175 crore and Rs 6,000 crore, respectively.

In FY21, the expenditure on BharatNet from the USOF was Rs 5,919.8 crore, 1.3% less than the Budget estimate of Rs 6,000 crore. In FY22, however, the expenditure was Rs 7,510 crore, as against the Budget estimate of Rs 7,000 crore for that year.

As per the Economic Survey 2023-24, 683,175 kilometre of Optical Fibre Cable (OFC) has been laid, connecting a total of 2,06,709 gram panchayats in the BharatNet phase I and II.

The overall teledensity (number of telephones per 100 population) in India increased from 75.2% in March 2014 to 85.7% in March 2024, while the number of wireless telephone connections stood at 1.165 billion at the end of March 2024, the survey said.