Budget gives rural telephony a leg-up | india | Hindustan Times
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Budget gives rural telephony a leg-up

Providing a fillip to the fastest growing telecom sector, FM enhanced allocations under USO fund for rural connectivity by 25%.

india Updated: Feb 28, 2006 17:20 IST
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Providing a fillip to the fastest growing telecom sector, Union Finance Minister P Chidmabaram on Tuesday enhanced allocations under Universal Service Obligation (USO) fund for rural connectivity by 25 per cent to Rs 1500 crore.

Besides this financial assistance has also been extended to cellular telephony companies to allure them to go to rural areas for which he proposed an amendment in the current Telegraph Act.

The Ministry of Communications would bring a Bill in the Budget session to amend the Indian Telegraph Act in order to support infrastructure for cellular telephony in rural India, the FM said.

With rural tele-density at an abysmal low of two per cent against an urban tele-density of 23 per cent and an overall tele-density of 11.75 per cent, the proposals will go a step further and lay part of the proposed 50 million rural connections in the next three years.

Chidambaram expects to bridge the digital divide between rural and urban India with the proposal to roll out 50 million phones in the next three years and thereafter telephone connection will be available on demand.

"The telecom sector in India is recording one of the fastest growth rates in the world. Tele-density stood at 11.75 per hundred at end-January 2006 and the ambitious target is to reach 250 million phone connections by December 2007. I am confident of success. I propose to provide Rs 1500 crore from the Universal Service Obligation Fund in 2006-07," Chidambaram said in the Budget.

In 2005-06, USO Fund had received Rs 1200 crore from the Finance Ministry.

The current telecom subscriber base of the country is 125 million.

The Finance Minister has also encouraged more people to use cellular phones by withdrawing the one-by-six schemes under which owning a cellular phone is one of the criteria to pay income tax for individuals.

Private players pay five per cent of their revenue towards the USO Fund which goes to Consolidated Fund of India under Finance Ministry. MoF disburses funds to bidders for rural telephony projects.

So far BSNL has received maximum funds under USO but of late private players are also getting funds under USO as they are bidding the rural community phone projects. The latest being a Rs 8000-crore project for rural households which was bagged by Tatas, Reliance Infocomm and BSNL to cover six million villages by 2007.

The scope of USO Fund was limited to fixed line so far and cellular players were not willing to go rural areas due to heavy expenditure incurred on laying the infrastructure.

The proposed amendment to the Telegraph Act 1885 may well remove this problem once the bill is passed after it is introduced in the Budget session.