India inches toward reducing universal service fee

Posted on March 23, 2009  /  0 Comments

Since 2005, LIRNEasia has been critical of the very high amount (5%) charged from Indian telecom consumers through the operators and then left unspent in government accounts (approx. USD 4 billion at last count). Our criticisms were presented in multiple forms including a book chapter. We made them known to the leadership of the Department of Telecommunications in face-to-face conversations.

Most recently, I discussed the harm caused by taxing poor people to purportedly serve poor people and then keeping the money unspent at a UNCTAD meeting on trade and regulation. In a recent newspaper article, Payal Malik was quoted as recommending the closure of the universal service fund, which is another way of saying the levy should be brought down to 0.

It appears that our work is having an impact. The first step, a cut in the rate, is in the works. It has been held back by a pernicious rider that would unduly benefit BSNL, but we are optimistic that the reduction will be effected.

In October last year, the Department of Telecom (DoT) had announced a cut in the fee contributed towards Universal Service Obligation Fund, a subsidy given to telcos to offer services in rural areas, to three per cent from five per cent now and had been kept in abeyance till further order.

Full article is here.

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