Centre plans expanding scope of USO Fund under a new entity

Ayushi Kar | | Updated on: Sep 21, 2022

The USO fund—nearly ₹60,000 crore—has been collected from annual revenue of telecom services providers witht the goal to provide telecommunications and digital services to rural, underserviced areas

The Centre may set up a new body to administer the Universal Service Obligation fund, outside of the Department of Telecommunications, with the scope expanded to include economically unviable areas in urban areas, promoting equipment manufacturing, funding pilot projects for driving innovation.

According to sources, this change will be part of the new Indian Telecommunication Bill, which is introducing new telecom laws in the stead of the Indian Telegraph Act regulating the sector since 1885. The fund will be now called the Telecommunication Development Fund.  

Fund collected over 19 years

The USO fund is a nearly ₹60,000 crore cache, collected from the annual revenue of telecom services providers with the goal to provide telecommunications and digital services to rural and underserviced areas. The collection of funds for this initiative commenced in 2003 and in the past 19 years the fund has collected a total accretive amount of ₹1.28 lakh crore. 

Main scheme BharatNet

The government has initiated many projects for rural connectivity utilising this fund, with the main scheme of USOF being BharatNet which aims to provide broadband connectivity to nearly 2.5 lakh gram panchayats. So far the fund has disbursed almost ₹42,000 core to the BharatNet project, with limited success. An additional amount of ₹20,000 crore for the second phase of the project has also been greenlit, however, its corresponding tender saw limited success in 2021.

Underutilisation of network

Overall, this project has struggled to take off. Businessline previously reported that in 2020-21 the network reported a profit of ₹1.46 crore, indicating the dismal underutilisation of the network. At present BharatNet is being merged with the telecommunications PSU, BSNL, in hopes of better implementation. 

As per the comments of the senior official, the ambit of the newly monikered Telecommunication Development Fund is being extended beyond rural connectivity to include urban connectivity programmes as well. Other areas where the fund will be disbursed include R&D for new technologies and projects, support for the telecom manufacturing ecosystem, support for pilot projects, and the introduction of new services and products.  

The exact mechanism of disbursement, the mandate and the operational changes made to the fund remain unknown. However, the development of the fund comes at a time when the government is signalling interest in fostering a robust ecosystem for indigenous telecom players.

This includes BSNL deploying Indian companies (TCS- Saankhya consortium) to deploy 5G networks. Government owned technology centre C-DoT has also joined a consortium of Indian enterprises called the Voice, which is bidding for various government pilot projects to develop usecases for agencies such as the ONGC or the defence in 4G and 5G. Recently the government also modified the existing telecom equipment PLI scheme by including a design element only giving locally designed projects preference.  

“The new fund could be utilised by BSNL to deploy their 4G/5G network by creating a mechanism to direct the flow of funds directly to TCS without the tendering or bidding process. (under the Telegraph Act, USOF funds can only be disbursed through a bidding process),” suggested an expert. Another expert added that the new fund will also have to undergo transformations in its operations, how it is managed and its goals in order to guarantee success.

Published on September 21, 2022
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