What is Digital Bharat Nidhi, govt’s fresh attempt at improving rural telecom connectivity?

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What is Digital Bharat Nidhi, govt’s fresh attempt at improving rural telecom connectivity

The Indian government has introduced Digital Bharat Nidhi, a significant initiative aimed at enhancing telecom connectivity in rural areas. This new program replaces the Universal Service Obligation Fund (USOF), which has faced criticism for not fully utilizing its resources for telecom projects.

Background and Rationale

On July 4, the Department of Telecommunications (DoT) released draft rules to operationalize the Digital Bharat Nidhi (DBN). The USOF, funded by a 5% levy on the Adjusted Gross Revenue (AGR) of telecom companies, was established to extend telecom networks to remote and rural regions where private companies are often hesitant to invest due to low profitability.

With the recent notification of parts of the Telecom Act, the government aims to transform the USOF into DBN, broadening its scope to address the challenges of rural connectivity more effectively.

How Digital Bharat Nidhi Will Work

According to the Telecom Act, contributions from telecom companies to the Digital Bharat Nidhi will be credited to the Consolidated Fund of India (CFI). This fund receives all government revenues, loans, and repayments, and is also used for government expenditures. The funds collected for DBN will then be periodically transferred from the CFI to the DBN.

The DBN will support the universal service objective by:

  • Promoting access to telecommunication services in underserved rural, remote, and urban areas.
  • Funding research and development of telecommunication technologies.
  • Supporting pilot projects, consultancy assistance, and advisory services to improve connectivity.
  • Introducing new telecommunication services and technologies.

Operational Mechanism

The DoT’s draft rules outline the operationalization of the DBN, including the appointment of an “administrator” who will select “DBN implementers” through bidding or application invitations. The administrator will decide the funding modalities on a case-by-case basis, which may include full funding, partial funding, co-funding, market risk mitigation, and risk capital.

The DBN will finance projects targeting underserved groups, such as women, persons with disabilities, and economically and socially weaker sections. The criteria for these projects include the introduction of next-generation telecom technologies, improving affordability, promoting innovation and indigenous technology development, and encouraging telecom start-ups.

Addressing Underutilization Issues

The USOF, established in 2003, has been criticized for underutilization. Between 2017 and 2022, the government collected ₹41,740 crore from telecom companies but utilized only ₹30,213 crore (72%). Notably, in 2019-20, the collection was ₹7,962 crore, but only ₹2,926 crore was utilized. In FY23, the government revised the USOF expenditure estimate to ₹3,010 crore, significantly lower than the budgetary estimate of ₹9,000 crore.

One major reason for this underutilization has been the underspending on the BharatNet project, aimed at providing fiber connectivity to villages. The introduction of DBN is expected to address these issues by ensuring better utilization of funds and more effective implementation of telecom projects in rural and underserved areas.

Conclusion

The Digital Bharat Nidhi represents a renewed commitment by the Indian government to improve telecom connectivity in rural areas. By replacing the USOF and expanding its scope, the DBN aims to overcome previous challenges and ensure that funds are effectively utilized to bridge the digital divide in India. This initiative is a crucial step towards achieving universal telecom access and fostering technological innovation in the country’s most remote regions.

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