India: Progress on USO fund

 9 July 2003 – According to a report by Indiatelecomnews.com, the Indian government may grant statutory status to the Universal Service Obligation (USO) fund. The fund, created to support rural telephony rollout, requires statutory status to release funds to reimburse companies for providing rural telephone service.

 The issue of introducing an ordinance was discussed at a meeting between officials of the Planning Commission and the Department of Telecommunication (DoT).

 “It was observed that the entire process (introducing legislation and getting it passed in Parliament) may take quite some time, while the requirement of rural telephony was immediate. Keeping the urgency of the matter in view, it was observed that the government may consider issuing a relevant ordinance in this regard,” sources said. 

Sources suggest that the annual requirement for rural telephony funding could be much larger than the expected USO receipts of approximately US$ 543 million. The optimum level for the USO levy needs to be determined by balancing the requirement of funds for rural telephony and the long-term goals of limiting sectoral levies on operators and not relying on license fees as a source of revenue generation for the government. At the meeting between the Planning Commission and the DoT, the DoT was asked to make "a comprehensive reference to Telecom Regulatory Authority of India (TRAI) to work out the optimum package", the sources added.

 An Act of Parliament is required to give the USO fund a statuary status. The money being collected as a USO levy via a portion the license fees from telecom operators, is being credited to the Consolidated Fund of India since the USO fund does not exist as a statutory entity. Initially, the move to expedite the process will primarily assist government telecom provider Bharat Sanchar Nigam Limited (BSNL) recoup its investment in rural telephone networks.

Intelecon Research & Consultancy Ltd. 09/07/2003

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