USOF support to BSNL

The Union Cabinet has approved the proposal to extend subsidy support of Rs. 1,250 crore to Bharat Sanchar Nigam Limited (BSNL) from Universal Service Obligation Fund (USOF), as compensation for deficit incurred by BSNL in operating the Rural Wire-line connections installed prior to 1st April, 2002.

Key facts:

• The government has also said that the subsidy support would be the last and final payment and no further request from BSNL for financial/subsidy support from USOF on this count shall be considered.
• In order to make Bharat Sanchar Nigam Limited (BSNL) eligible for subsidy funding on nomination basis from USOF, amendment will be required in Rule 526 of the Indian Telegraph Rules (ITRs), 1951. It stipulates that the criteria for selection of Universal Service Providers shall be made by bidding process from amongst eligible entities for implementation of USOF schemes. Corresponding Amendment in Rule 525 will also be required.

Background:

USOF since its inception in 2002 has been providing subsidy for BSNL for the rural wire line connections installed prior to 1.4.2002. A total of Rs. 8,692 crore has been extended as USOF subsidy support till date, for the rural wire-line connections, installed by BSNL prior to 1.4.2002.

Universal Service Obligation Fund:

USOF, established in 2002, provides effective subsidies to ensure telegraph services are provided to everyone across India, especially in the rural and remote areas. It is headed by the USOF Administrator who reports to the Secretary, Department of Telecommunications (DoT).

• Funds come from the Universal Service Levy (USL) of 5% charged from all the telecom operators on their Adjusted Gross Revenue (AGR) which are then deposited into the Consolidated Fund of India, and require prior parliamentary approval to be dispatched.
• The USOF works through a bidding process, where funds are given to the enterprise quoting the lowest bid. However, the funds for NOFN were made an exception to this process since BBNL was the sole party involved in the implementation having being specifically created for it.