For the sixth straight financial year, the government’s actual spending from the Universal Services Obligations Fund (USOF) is expected to fall short of the Budget estimates. In FY23, the expenditure from USOF which is meant to provide connectivity to rural and remote areas to bridge the digital divide is expected to be around Rs 5,500 crore compared to the Budgetary estimate of Rs 9,000 crore, according to sources.

The government had increased the planned expenditure from USOF by 8% in FY23 from Rs 8,300 crore, which was the actual expenditure in FY22. Out of the Rs 9,000 crore, Rs 7,000 crore was earmarked for the BharatNet project for fiber connectivity to villages, and Rs 2,000 crore was earmarked for compensation to telecom operators for creating infrastructure in rural and far-flung areas, and maintenance of village communication infrastructure.

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As of October 31, the government, however, has spent only Rs 1,213.39 crore in the current financial year, whereas the balance in the fund stood at about Rs 64,774 crore, data from the USOF website showed.

Trends related to actual spending from USOF suggest that in FY18, the actual expenditure was 40% less than the Budget estimate of Rs 11,636 crore, whereas, in FY19 and FY20, the actual expenditure was 52% and 65% less than the Budget estimates of Rs 10,000 crore and Rs 8,350 crore, respectively. In FY21, the expenditure from the USOF was Rs 7,200 crore, 10% less than the Budget estimate of Rs 8,000 crore. Similarly in FY22, the expenditure was Rs 8,300 crore, 8% less than the Budget estimate of Rs 9,000 crore for that year.

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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  for a reduction in their USO levy to 3% of their AGR. “We applaud the recent reforms by the government for the telecom industry. However, the government needs to see the balance in the USOF today and accordingly either reduce the USO levy or freeze it for some time till the funds get utilised,” an executive of a telecom company said.

While presenting the Budget for 2022-23, finance minister Nirmala Sitharaman had said, “Our vision is that all villages and their residents should have the same access to e-services, communication facilities, and digital resources as urban areas and their residents. The contracts for laying optical fibre in all villages, including remote areas, will be awarded under the Bharatnet project through PPP (public private partnership) in 2022-23. Completion is expected in 2025. Measures will be taken to enable better and more efficient use of the optical fibre”.

However, owing to lack of interest from private players and the merger of BSNL and Bharat Broadband Network (BBNL) in July, the government has put the PPP model in abeyance, sources said.

“The government has made progress on the BharatNet project in FY23 as over 180,000 gram panchayats have been service ready on optical fiber cable and work on framework for phase-III of the project is going on,” sources said, adding that multiple challenges have led to delay in implementation of BharatNet project.

Recently, minister of state for communications Devusinh Chauhan in a reply to a question in Parliament said that involvement of multiple agencies, slow progress by implementing agencies, delay in right of way clearances from government instrumentalities regulating forest land, railway lines, defense areas, highways, oil and gas pipelines or any other agencies or departments are some of the reasons for delay in implementation of BharatNet project.

“As on 31.10.2022, Rs 36,502.41 crore has been allocated/released/disbursed from Universal Service Obligation Fund (USOF) under BharatNet project,” Chauhan had said in reply to a question in Lok Sabha.

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 USOF. Further, the scope of USOF was also extended to include funding for research and development projects for the telecom sector as part of Telecom Technology Development Fund (TTDF) scheme. Starting with the funds collected in FY22, the government will allocate 5% of annual collections from 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 Andaman and Nicobar Islands and Lakshadweep via submarine optical fiber cable, connectivity in left-wing extremism zones etc.