After 20 years,50% of Universal Service Obligation Fund remains unutilized
Sai Krishna Muthyanolla
August 16, 2021
The Universal Service Obligation Fund (USOF) was established in 2002 to fund the extension of telecom services to commercially unviable rural and remote areas of the country. In the last 20 years since its introduction, more than Rs. 1.17 lakh crores have been collected of which more than Rs. 59000 crores only have been disbursed, leaving almost 50% of the fund unutilized.
Information & Communication Technology (ICT) has permeated into all aspects of life by providing novel and faster ways of delivering & accessing information and providing services. Changes in social, political, and economic relations in modern society have been witnessed because of the advent of ICT. What was once a facility has now become a necessity. Life without ICT has become unimaginable, especially post-pandemic as most institutions have resorted to ICT to deliver their services. Doctor consultations, education, and even judicial proceedings went online because of COVID-19.
For many years now, the Indian government had rolled out several schemes for the expansion of telecom services in rural and remote areas of the country such as the BharatNet project, Comprehensive Telecom Development Plan for the North-Eastern Region, and LWE scheme. The Universal Service Obligation Fund (USOF) was established in 2002 to provide financial support for the provision of telecom services in commercially unviable rural and remote areas of the country. With the vision to provide affordable access to reliable and ubiquitous telecommunications networks to all rural Indians, the USOF was established. The scope of USOF covers all telecom services including mobile services, broadband connectivity, and the creation of infrastructure like Optical Fiber Cable (OFC), etc. in rural and remote areas.
Many Countries have formulated policies to ensure ‘Universal Access’ to ICT
ICT services are not available in some areas due to commercial non-viability because of sparse population, remoteness of areas, insurgency, difficult terrain, unavailability of supporting infrastructure like roads, and low income of persons. In rural and remote areas, not only is the capital cost high for providing telecom services, but the revenue generated is also low due to lower population density, and lack of commercial activities. Since normal market forces alone are inadequate to serve these areas, many countries formulated policies to provide Universal Access and Universal Service to ICT. The USOF is one such mechanism that extends support through subsidies and incentivizing telecom service providers in such areas.
USOF was given statutory status in 2003
The New Telecom Policy of 1999 had ‘Universal Service’ as one of its main objectives. The idea was to strike a balance between the provision of Universal Service to all uncovered areas, including the rural areas, and the provision of high-level services capable of meeting the needs of the country’s economy. The resources for meeting the Universal Service Obligation (USO) were to be generated through a Universal Access Levy (UAL), at a prescribed percentage of the revenue earned by the telecom licensees to be decided in consultation with the Telecom Regulatory Authority of India (TRAI). The Indian Telegraph (Amendment) Act, 2003 gave statutory status to USOF.
USOF funds are being used for many schemes
Several schemes have been taken up with funding from USOF for the expansion of telecom services in rural and remote areas of the country. The implementation of the USOF schemes is carried out through the Service Providers after entering into specific contracts. Some of the schemes funded under USOF are
The sums of money received towards USOF are first credited to Consolidated Fund of India and the Central Government may, with the approval of parliament, credit such proceeds to the fund from time to time for being utilized exclusively for meeting USO. As per the Department of Telecommunications, there have been 24 partners in USOF schemes including BSNL, Reliance Communications Limited, Vodafone, Bharti Airtel Limited, etc.
More than 1 lakh crore rupees has been collected under USOF
As of 31 May 2021, a total of Rs. 1,17,453 crores have been collected as UAL under the USOF. Since the constitution of USOF, the collection of UAL was the highest in 2015-16 with Rs. 9,836 crores. In the first year i.e., 2002-03, the UAL collection was Rs. 1,654 crores, and crossed Rs. 3,000 crores for the first time in 2004-05, crossed the Rs. 5000 crore mark in 2007-08, and crossed the Rs. 7000 crore mark in 2013-14. From 2015-16 onwards, an average of about Rs. 8,500 crores was collected annually. Two months into the financial year 2021-22, Rs. 372.79 crores have been collected as of 31 May 2021.
50% of funds under USOF remain unutilized
As of 31 May 2021, a total of Rs. 59,369 crores only have been disbursed under USOF. This is about 50.5% of the total amount collected under USOF so far. About Rs. 58,083 crores are the balance fund available for utilization as the fund does not lapse at the end of the year. In 2021-22, in the first two months, about Rs. 145.7 crores have been disbursed.
In the first two years since the introduction of USOF i.e., 2002-03 and 2003-04, the disbursement under USOF was Rs. 300 crores and Rs. 200 crores respectively. Since then, the disbursement has gradually increased, though not consistent. Disbursement of Rs. 8549 crores were made in 2008-09, the highest disbursement in the financial year till date. The high amount in 2008-09 was due to the release of reimbursement of the license fees and spectrum charges to BSNL, amounting to Rs. 6949 crores over the period 2002-03 to 2005-06, for fulfilling the rural obligation. Disbursement under USOF was about Rs. 7,200 crores each in 2016-17 and 2020-21, and close to Rs. 7,000 Crores in 2017-18.
Nearly 47% of disbursement for the National Optical Fibre Network project
Of the total Rs. 59,369.19 crores that have been disbursed under USOF in the 19 years, nearly 47% of the disbursement, about Rs. 28,000 crores have been released for the National Optical Fibre Network (NOFN) project under the Department of Telecommunications (DoT). Another 27% of the funds, about Rs.16,288 crores, have been disbursed to DoT. More than Rs. 2,000 crores were given for the Left Wing Extremism (LWE) project under DoT and more than Rs. 1,000 crores each was allocated to the states of Maharashtra and Tamil Nadu. Including the disbursement made to the telecom circles of Madhya Pradesh, Andhra Pradesh, Rajasthan, Karnataka, UP (East), Gujarat, Jharkhand, Bihar, and Odisha which got more than 1% each, the disbursement made to the said circles accounted for more than 93% of the disbursement made so far.
Non-utilization of the fund has been highlighted by CAG multiple times
The data clearly indicates that only about half the funds under USOF have been disbursed so far. The issue of the short transfer of the levy to the USO Fund has been highlighted by the CAG in its successive reports.
Currently, the License Fee to be collected from commercial telecom licensees is 8% of the Adjusted Gross Revenue (AGR), inclusive of USO Levy which is presently 5% of AGR. There have been multiple instances requesting a deduction of the USO levy on telecom operators be cut by 2 percentage points to 3% considering the poor utilization of funds. Even the Cellular Operators Association of India (COAI) wrote to TRAI asking for a reduction in the fee collected.
Featured Image: Universal Service Obligation Fund