Is Funds of USOF Spent Elsewhere, apart from Rural Connectivity

Telecom minister Ravi Shankar Prasad wrote to finance minister Nirmala Sitharaman before the presentation of this year’s Union Budget that the universal social obligation fund (USOF) levy on telecom operators be cut by 2 percentage points to 3%, he probably knew that this fund is used more for bridging fiscal gaps rather than for providing telecom connectivity in rural areas.

The total accrual in the funds as on date is Rs 99,674.59 crore. Against this, only Rs 49,120.35 crore have been disbursed for telecom projects so far - meaning that the government has spent the balance Rs 50,554.24 crore for other purposes. Of the amount disbursed, the bulk Rs 20,473 crore has been disbursed for the BharatNet project which is aims to connect the gram panchayats with optic fibre for broadband connectivity.

As on March 2014 the USOF had total accrual of Rs 58,579.35 crore, of which only Rs 24,896 crore was disbursed to the department of telecommunications for rural telecom projects.

Sources said, the money collected goes into the consolidated fund of India and stays there and there’s no check on government spending it elsewhere. Only when telecom projects are approved by the government, funds are transferred to DoT through the approval of Parliament. The Telecom Regulatory Authority of India (TRAI) had first in 2015 recommended that the USOF levy be reduced by two percentage points.

The report submitted by the Comptroller and Auditor General of India (CAG) in 2018 says, They have observed that as on March 2017, an amount of Rs 48,407.54 crore has still not been transferred to the USOF by the government of India.

Revenue Sharing Equation:

The revenue sharing license fee agreement done by Telecom operator is 8% of their adjusted gross revenue to the government. Of this, 5% goes to USOF and 3% to the general exchequer. Since, theoretically the general exchequer is supposed to utilise only 3% of the amount for balancing its books, it would not lose anything if the USOF levy is reduced. In a report written by Minister to the Finance ministry on JUne 18th 2018, “Given that rural teledensity has significantly increased since the time the Fund was set up in 2003, it is proposed that USOF levy maybe reduced from 5% to 3%.”