USO fund: Half the money meant for telecom used elsewhere

By: |
September 29, 2020 8:15 AM

In its report on the Union government accounts for 2018-19, the CAG has noted: “The issue of short transfer of the levy to the USO Fund has been brought out in successive reports of the CAG on the Union Accounts for the years 2009-10 to 2014-15 but is yet to be corrected.”

Thus, there was a short transfer of UAL to the USO fund amounting to Rs 2,123 crore.Thus, there was a short transfer of UAL to the USO fund amounting to Rs 2,123 crore.

The case for reducing the universal service obligation levy on telecom service providers gets strengthened once again with the Comptroller and Auditor General of India (CAG) highlighting its short transfer to the Universal Service Obligation Fund (USOF) and instead it being retained in the Consolidated Fund of India for other purposes.

In its report on the Union government accounts for 2018-19, the CAG has noted: “The issue of short transfer of the levy to the USO Fund has been brought out in successive reports of the CAG on the Union Accounts for the years 2009-10 to 2014-15 but is yet to be corrected.”

For the year 2018-19, the CAG has noted that a total of Rs 6,911.50 crore was collected as universal access levy (UAL), of which only Rs 4,788.22 crore was transferred to the USOF. Thus, there was a short transfer of UAL to the USO fund amounting to Rs 2,123 crore.

The short transfer to the fund in 2018-19 may still look small compared with the total collection since 2002 when the fund was incorporated, its disbursal and what lies unutilised in the CFI. As on date, the total collection in the USOF stands at Rs 110,023.57 crore, of which the disbursal is to the tune of Rs 54,490.49 crore. This means a balance of Rs 55,533.07 crore – almost half of the total collection – lies parked in the CFI. The USO levy is first supposed to be credited to the CFI and subsequently transferred based on the appropriation approved by Parliament to a non-lapsable USOF created in the public account for being utilised exclusively for the purposes for which the levy is being collected. Clearly, this is not happening as pointed out by CAG over successive years.

Telecom minister Ravi Shankar Prasad has in the past written to the finance minister that the levy on telecom operators be cut by two percentage points to 3%, as he probably knows that this fund is used more for bridging fiscal gaps than for providing telecom connectivity in rural areas. Even the Telecom Regulatory Authority of India (Trai) has since 2015 been recommending that the USOF levy be reduced by two percentage points.

In fact, the disbursal under USOF picked some pace only after 2014-15 due to the BharatNet project, to which Rs 22,089 crore has been disbursed so far, which is almost 42.46% of the total disbursal.

Telecom operators pay a revenue share licence fee of 8% of their adjusted gross revenue (AGR) to the government. Of this, 5% goes to the USOF and 3% to the general exchequer. Since the general exchequer is supposed to utilise only 3% of the amount for its books, it would not lose anything if the USO levy is reduced or even scrapped.

However, in reality since the USO money is used for purposes other than for what it is collected, no government welcomes the idea of reducing the levy.

This is what Prasad had earlier written to the finance ministry: “Given that rural teledensity has significantly increased since the time the Fund was set up in 2003, it is proposed that USOF levy may be reduced from 5% to 3%.

The 2% USOF levy reduction may be made available to the telecom service providers provided that this amount is utilised by them for carrying out research and development for development and deployment of indigenous technologies in the country.”

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