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USO Fund administrator rejects a proposal to provide subsidy support to BSNL

January 16, 2012
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The Universal Services Obligation (USO) Fund administrator has reportedly rejected a proposal to provide subsidy support to Bharat Sanchar Nigam Limited (BSNL) for operating fixed line telephones in rural areas.

BSNL had requested an annual sum of Rs 10-Rs 15 billion to operate connections in rural areas on grounds that they were economically unviable. The operator had thus requested the USO Fund for support in lieu of the decision to abolish access deficit charges.

However, the USO Fund administrator has said that the subsidy cannot be given to a single operator. An internal USO Fund note stated, “The USO Fund is not in favour of any form of generalised support for rural wireline exchanges, as this would not necessarily lead to optimum utilisation of the wireline.”

“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 an annual deficit of Rs 93 billion due to rural phone connections. It offers services at a lower rate to meet the government's social obligations.

Prior to this, in December 2011, R.K. Upadhyay, chairman and managing director, BSNL, had written to the Department of Telecommunications (DoT) requesting support. In the letter, he said that BSNL was not able to cross-subsidise services in rural areas due to competition. “Even with the number of rural wireline subscribers decreasing, network infrastructure is still required to be maintained at a particular optimum capacity with a certain fixed cost,” Upadhyay said.

Meanwhile, it is believed that the Telecom Regulatory Authority of India (TRAI) is yet to give its opinion on this issue, which may swing the decision in BSNL’s favour.

In this context, therefore, DoT has asked the USO Fund administrator to enhance the budgetary allocation for financial year 2011-12 by Rs 10 billion on BSNL's account.


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