Two leading operators, RCom and Bharti, have approached the government seeking to prematurely exit from the rural telephony scheme under the USO subsidy without fulfilling the commitment they had made by winning bids in 2007 to provide telecom services in villages.

The government has an over Rs 14,000 crore corpus under the Universal Service Obligation (USO) Fund. All service providers contribute to this fund and it is used to provide subsidy to operators and infrastructure providers to set up operations and offer telecom services in rural areas.

The Telecom Ministry is contemplating to ban the non-performing service providers from participating in the next round of bidding, to be launched soon.

The administrator handling the fund is also planning to change the criteria in a way that operators and infrastructure providers were not allowed to exit without fulfilling their commitments and are offered subsidy accordingly.

The government had invited bids in 2007 to create telecom infrastructure and provide services in villages and had offered subsidy as well, but the operators opted to go there without seeking subsidy or even offered negative subsidy (instead they offered to pay to the government) either to block other service providers from going there or because they over-estimated the potential in rural villages.

When contacted, officials in the Universal Service Obligation (USO) Fund administration under the Telecom Ministry confirmed that Reliance Communications has less than 500 base stations active out of about 8,000 committed by them. Similarly, Bharti has also approached the USOF to exit from the scheme, officials said.

“However, the requests of Reliance Communications and Reliance Telecom (both belong to Anil Ambani—led group) and Bharti have been turned down... There is no provision for service providers to unilaterally exit from the agreement on their own,” officials added.

Asked whether any penalty or liquidated damages would be levied upon the non-performing service providers, officials said, “An exit policy is being framed, but no final decision has been taken in this regard.”

Rural tele-density continues to be as low as about 26 per cent, as against 69 per cent penetration in urban India.

Increasing rural telephony has been the government’s priority and roll-out of any scheme may take all these factors into consideration while inviting bids for subsidy to be availed by the service providers to offer services in the rural areas.

The first phase was for five years (2007—2012), for which the operators were invited to offer services in villages with a population of 2,000 and the next phase may be for villages with a population less than 2,000 or even 500.

Keeping in the mind that these operations may not be financially viable, the USOF administrator need to think of schemes wherein the operational and capital expenditure in minimum.