Plan to subsidise BSNL for operating rural lines rejected

Thomas K Thomas
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The USO fund administrator has taken a view that the subsidy cannot be given to a single operator.

The Universal Services Obligation fund administrator has rejected a proposal to give subsidy support to Bharat Sanchar Nigam Ltd for operating fixed line telephones in rural areas.

BSNL had sought Rs 1,000-Rs 1,500 crore annually to operate connections in rural areas on grounds that they were economically unviable. The PSU wanted support from the USO fund in lieu of the decision to abolish access deficit charges.

However, the USO fund administrator has taken a view that the subsidy cannot be given to a single operator. “USOF is not in favour of any form of generalised support for rural wire line exchanges as this would not necessarily lead to optimum utilisation of the wire line,” said an internal note.

“Subsidy disbursement has to be related to concrete improvements in rural infrastructure and services, and cannot be used to fund deficits of a specific operator,” it added. BSNL had projected a deficit of Rs 9,300 crore annually due to the rural phones where it offers services at a lower rate to meet the Government's social obligations.

Earlier in December, BSNL's Chairman and Managing Director, Mr R. K. Upadhyay had written to DoT seeking support. In his letter to the department, he said that BSNL was not able to cross-subsidise the services in rural areas due to competition. “Even with the number of subscribers of rural wire lines going down, the network infrastructure is still required to be maintained at a particular optimum capacity with a certain fixed cost,” Mr Upadhyay said.

The only hope now for the PSU is to wait for the recommendations of the telecom regulator on this issue. According to sources, the Telecom Regulatory Authority of India (TRAI) may give a proposal in favour of BSNL. In anticipation of this, the DoT has asked the USO fund administrator to seek an enhancement of budgetary allocation for the financial year 2011-12 to the extent of Rs 1,000 crore on BSNL's account.

(This article was published on January 14, 2012)
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