BSNL_Office,_East_Street,_Pune_Camp (1)

The Union Cabinet has cleared subsidy amount of Rs 1,250 crore to state-owned telco BSNL as a form of compensation to fund deficit that it incurred in operating rural wireline connections installed prior to 1st April, 2002. The fund comes from Universal Services Obligation Fund set up by the government in 2002 to be utilized for providing telecommunications services in rural areas at subsided rates.

The current amount of Rs 1,250 will compensate those connection provided before April 2002, as per TRAI and Telecom Commission evaluation and assessments. As of March 31, 2014, the total number of eligible rural wire-line connections, under the subsidy scheme stood at 32.32 lakh connections.

No more USOF support for BSNL: The Cabinet also added that this 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.” USOF has already provided a total of Rs 8,629 crore as subsidy to BSNL for providing rural wireline and broadband connection since April 1, 2002. These funds were released over period between April 2002 to July 2012, based on TRAI’s recommendations.

What the subsidy connection offers: Under a subsidy scheme (doc), BSNL provides broadband connections to the rural and remote areas of the country through its rural wireline exchanges at rates starting from Rs 99, Rs 150, Rs 350 up till Rs 999. Each connection is provided at a minimum speed of 512 Kbps with zero installation registration and security deposit. BSNL also provides “broadband kiosks” in rural areas under the scheme with a minimum of latest one workstation with pre-loaded applications such as “video chat, video conferencing, tele-medicine and tele-education.”

USOF explained: USOF was set up to fund the operation and maintenance of village/rural level public telephones, to provision household telephones in rural and remote areas, to create infrastructure, to popularise use of mobile services in remote areas, and to create broadband connectivity in rural areas. Since its inception in April 2002, it has disbursed Rs 31177.45 crore for various projects up till 2016 and still has Rs 47412.89 crore that can be allocated for future projects and for fulfillment of existing plans.

NOFN plans and USOF funding: USOF also funds the National Optic Fibre Network (NOFN) project, although it is not clear how much funding is allocated. In June 2014, USOF “halved” the broadband network coverage target for 2014-15 under NOFN from 50,000 villages by 2015, as opposed to the targeted 100,000 villages. At the same time, BSNL, RailTel and PowerGrid had bagged the contracts for cable laying and trenching under the project.

Interestingly, in an agreement (pdf) made with Bharat Broadband Network Limited earlier in 2014, USOF says that the target was to reach 250,000 gram panchayats by 2013. It was reported in February that under NOFN, the government successfully laid optical fibre in 36,738 gram panchayats till 17 January. It plans to roll out cables in 50,000 panchayats by March. Its aim is to connect 90,000 villages by fiscal 2017 end. However, only 4,000 villages have been linked to the network, according to a GovernanceNow report.