A significant cut in spending from the Universal Service Obligation Fund (USOF) in FY23 against the Budget targets indicates that for the sixth continuous year, the government’s spending to provide connectivity to rural and remote areas to bridge the digital divide has slowed down.In FY23, the government revised the expenditure estimates from the USO fund to Rs 3,010 crore, which is 200% less than the budgetary estimate of Rs 9,000 crore. A reason for the weak spending from the USOF can be attributed to the underspending of funds allocated for the BharatNet project for fibre connectivity to villages.
The trend in underspending is noteworthy in the sense that telecom operators, who contribute 5% of their AGR (adjusted gross revenue) to the USOF, have been demanding a reduction in their USO levy to 3% of their AGR. As of October 31, 2022, the balance in the USOF was Rs 64,774.2 crore.
Telcos also want the government to freeze their contribution to the fund till the time the balance gets exhausted. “While the government has eased a lot of burden on the sector, we believe there must be a reduction on USOF levy as well to reduce the burden,” an industry executive said, adding that telecom companies need to sustain cashflows, especially when the average revenue per user is low.In the expenditure budget, the government shows two items under the USOF head. One is the allocation for the BharatNet project and the other is compensation to telecom operators for creating infrastructure in rural and far-flung areas, and maintenance of village communication infrastructure. In FY23, the revised estimates also show fund allocation for R&D (research and development).
For FY24, the spending from the USOF is pegged at Rs 10,400 crore, over three times higher than the revised estimates for FY23. Currently, a major allocation of the USOF goes towards the BharatNet project. “Involvement of multiple agencies, slow progress by implementing agencies, delay in right of way clearances from government instrumentalities regulating forest land, railway lines, defence areas, highways, oil and gas pipelines, or any other agencies or departments are some of the reasons for delay in implementation of the BharatNet project,” minister of state for communications Devusinh Chauhah had said in Parliament in December.Apart from the RoW-related issues, lately concerns around the quality of fibre deployed under BharatNet are also making the rounds.
Trends related to actual spending for BharatNet suggest that 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 `8,175 crore and Rs 6,000 crore, respectively. In FY21, the expenditure on BharatNet from the USOF was `5,919.8 crore, 1.3% less than the Budget estimate of `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. In FY23, the revised estimates again suggest a near 79% fall in the spending for the BharatNet project. Therefore, in the six financial years, including FY23, the government’s spending from the USOF will be weak.In 2017, the Cabinet approved funding of Rs 42,068 crore for the BharatNet (Phase-I and Phase-II) projects. In 2021, the Cabinet allocated another Rs 19,041 crore to implement the project under the public-private partnership (PPP) mode, which, however, failed to attract the interest of the private players. “As on 31.10.2022, Rs 36,502.41 crore has been allocated/released/disbursed from USOF under BharatNet project,” Chauhan had said in Parliament.
As of November-end, a total of 184,399 gram panchayats have been service-ready under the BharatNet project. The target is to provide broadband connectivity to 250,000 gram panchayats by 2025.After no response under the PPP model, the government is working on the modules of phase-3 of the BharatNet project. Post the merger of BSNL and Bharat Broadband Network (BBNL) in July, the government has likely put the PPP model in abeyance, sources said. BBNL is the implementation agency of BharatNet.
Apart from the BharatNet project, the government recently approved a project to connect 24,680 villages in remote and difficult areas with 4G at a total cost of Rs 26,316 crore, for which the fund will be allocated through the USOF. Further, the scope of the USOF was also extended to include funding for research and development projects for the telecom sector as part of the Telecom Technology Development Fund (TTDF) scheme. Starting with the funds collected in FY22, the government will allocate 5% of annual collections from the USOF for funding R&D in the telecom sector.
Some of the ongoing schemes from the USOF include implementation of a comprehensive telecom development plan for the North-Eastern region, connectivity to the Andaman & Nicobar Islands and Lakshadweep via submarine optical fibre cable, connectivity in left-wing extremism zones, etc.