The department of telecommunications (DoT) has started work on a proposal that would provide people in rural areas a one-time subsidy on new mobile connections, with the department paying 20% of all mobile bills that are less than R300 a month. The subsidy would be provided by dipping into the universal service obligation (USO) fund, which currently has an unutilised corpus of R21,840 crore. Since all telecom operators pay 5% of their annual adjusted gross revenues towards the USO fund to subsidise rural telephony, using the fund for the purpose would not be a problem procedurally.

Sources said the DoT has started work on the proposal after resisting it initially because it has been suggested that it uses the unique identity or UID mechanism to ensure that such subsidies reach the targeted population. When the proposal was first mooted earlier this year by the Planning Commission, the Prime Minister?s Office had asked the DoT to examine it. The DoT had then resisted it stating the scheme would lead to large-scale leakages and not reach the targeted rural population.

Interestingly, the idea has also been recently suggested by the high-level committee on financing infrastructure, which was headed by Deepak Parekh. However, the committee has not dwelt on the mechanisms of the scheme by merely stating that ?since connectivity is a form of empowerment, the committee recommends that USO funds may be used for subsidising telephone connections to the rural population that has remained uncovered so far?.

While the DoT has rejected the other suggestion of the committee, that of increasing foreign direct investment in the telecom sector to 100% from the current 74%, it has not done so in case of the rural subsidy proposal.

Sources said that the broad contours of the proposal would remain the same as first suggested by the plan panel. The suggestion was that people in rural areas be given a one-time subsidy of R250 for a new mobile connection. Further, the government should reimburse 20% of all monthly mobile bills that are less than R300. The rationale behind this was that since 30% of a consumer?s mobile bill goes to the government in the form of taxes and other statutory levies, the government should partly reimburse this amount in cases of rural customers to increase the penetration of mobile phones in these areas.

For mobile operators, the scheme may turn out good as they can expect such rural customers to increase the usage of their phones. However, the industry?s official position is that the government should either disband collection of the USO fund or gradually reduce it since they on their own have rolled out services in rural areas. Further, industry players argue, abolishing the levy would reduce the bills of all mobile subscribers.

From the government?s point of view, the idea of the scheme has come at just the right time because its USO projects have not met with any success so far.

The major problem has been that they are mostly conceived around wireline village public telephones or sharing of physical infrastructure. A direct subsidy in the hands of the user may work out better.

Though rural tele-density has improved, it still hovers at 40 per 100 people compared to 157 for every 100 people in urban areas. Of the country’s total 913 million mobile subscriber base, only 334 million are rural subscribers.