Context:
The Department of Telecommunications (DoT) recently released draft rules to operationalize the Digital Bharat Nidhi to increase telecom connectivity in rural areas.
Purpose and Functionality of Digital Bharat Nidhi (DBN):
- Replacement of Universal Service Obligation Fund (USOF): DBN replaces the USOF, which is funded by a 5% levy on telecom operators’ Adjusted Gross Revenue (AGR).
AGR is a fee-sharing mechanism between the government and the telcos who shifted to the ‘revenue-sharing fee’ model in 1999, from the ‘fixed license fee’ model. - Replacement of USOF seeks to overcome reluctance by private companies to serve non-lucrative rural markets.
- Funding Mechanism: Contributions from telecom companies will go to the Consolidated Fund of India, and then this fund will be allocated to DBN.
- Utilization: DBN has a broader mandate than USOF, focusing on promoting telecommunication services in underserved rural, remote, and urban areas.
DBN funds will support various initiatives including infrastructure expansion, research, pilot projects, and enhancing the affordability of telecom services.
Universal Service Obligation Fund:
- The aim is to ensure that high-quality and affordable mobile and digital services reach rural and remote areas, promoting equal access to networks and information.
- This initiative is expected to boost socio-economic development and enhance living standards in underserved, rural, and remote areas.
- The USO Fund is currently headed by an Administrator appointed by the Central Government under the Department of Telecommunications, Ministry of Communications.
Operational Framework:
- Administrator Role: An administrator appointed by the Centre will manage DBN funds and select implementers through bidding or by inviting applications.
- Project Funding: Funds disbursed by the administrator can be in terms of full, partial, co-funding, or for market risk mitigation.
Objectives and criteria:
- Projects supported by DBN must focus on improving access, affordability, and innovation in telecommunication technologies to benefit underserved groups like women, persons with disabilities, and economically weaker sections.
- Criteria such as introduce next-gen telecom technologies, improve service affordability, promote R&D and indigenous tech, develop national/international standards, and support telecom start-ups and equipment manufacturing
- DBN implementers must operate networks on an open and non-discriminatory basis as per administrator instructions.
Challenges and Past Performance:
Underutilization of USOF: Historical underutilization of USOF funds is a concern, with only about 72% of collected funds utilized from 2017 to 2022.
- In FY23, the government significantly reduced its expenditure estimate from the USO fund to Rs 3,010 crore, a reduction of 200% from the initial budgetary estimate of Rs 9,000 crore.
- This reduction in spending largely stems from the underutilization of funds earmarked for the BharatNet project, aimed at providing fiber connectivity to rural villages.