Page 1 : UNIVERSAL SERVICE OBLIGATION FUND, BACKGROUD, DND, 1. USOF formed by the Act of Parliament was established w.e.f 01.04.2002 to provide, data service and internet access to all uncovered villages., 2. The resource of implementation of USOF are raised through a Universal Service Levi, (USL) which has presently fixed at 5% of the Adjusted Gross Revenue (AGR) of all, Telecom Service Providers. In addition, the Central Government may also give grants, and loans to USOF., 3. The Fund is to be utilized exclusively for meeting the Universal Service Obligation to, provide telegraph and internet services to people in rural and remote areas at, affordable and reasonable prices., 4. Support from the Fund is being carried by means of a bidding process on the least –, quoted – subsidy support basis (reverse auction), 5. Levy amount is credited to Consolidated Fund of India. Fund is made available to, USOF after due appropriation through Parliamentary approvals. The activities under, USO fall under Non-Plan Budget and the balance to the credit of the Fund does not, lapse at the end of the financial year., 6. The Universal Service Provider (USP) is defined as the person who entered into an, Agreement with the Administrator for the purpose of implementation of Universal, Service Obligation., [Para 7.1 Telecom Accounts and Finance Manual], , USOF – ORGANISATIONAL STRUCTURE AND FUNCTIONS, THE USOF ADMINISTRATION OF INDIA, The Office of Administrator USOF was constituted on 01.04.2002 by the Indian, Telegraph (Amendment) Act, 2003. The Rules for administration of the Fund known as, Indian Telegraph (Amendment) Rules, 2004 were notified on 26.03.2004. An Officer of the, rank and status of Secretary to Government of India has been appointed w.e.f. 01.06.2002, as Administration, Universal Service Obligation Fund. The office of the Administrator is an, attached Office of DOT., The Administrator has powers to:a) Formulate bidding procedures including its terms and conditions for the purposes of, implementation of Universal Service Obligation;, b) Evaluate the bids called for the purposes of implementation of Universal Service, Obligation;

Page 2 : c) Enter into agreement with the Universal Service Provider for the purposes of, implementation of Universal Service Obligation;, d) Settle the claim of Universal Service Provider after due verification and make, disbursements accordingly from the fund;, e) Specify relevant formats, procedures and records to be maintained and furnished by, the Universal Service Provider;, f) Monitor the performance of the Universal Service Provider as per the procedure, specified by him from time to time., [Para 7.2 Telecom Accounts and Finance Manual], , Streams of USOF activities as amended from time to time:Stream-I: Provision of Public Access Service (Schemes on VPTs and RCPs) Stream-II: Provision of Household Telephones in Rural and Remote Areas (RDELs) –, Stream-III: Scheme on Creation of Infrastructure for provision of Mobile Services in Rural and Remote Areas. (Mobile, Infrastructure Phase – I)Stream-IV: Provision of Broadband Connectivity to rural & remote areas in a phased manner (Wire Line Broadband, (WLBB), Rural Public Service Terminals (RPST)) –, Stream-V: Creation of General Infrastructure in Rural and Remote Areas for Development of Telecommunication, Facilities. (Optical Fiber Cable (OFC) for Assam) –, Stream-VI: Induction of new technological developments in the telecom sector in Rural and Remote Areas: Pilot, projects to establish new technological developments in the telecom sector, which may be deployed in the, rural areas may be supported with the approval of the Central Government (Solar Mobile Charging FacilitySMCF)., (CHAPTER 7 USOF OF TELECOM ACCOUNTS AND FINANCE MANUAL), , 7.8 SALIENT FEATURES OF VARIOUS AGREEMENTS UNDER USOF, 7.8.1 OPERATION AND MAINTENANCE OF VILLAGE PUBLIC TELEPHONES (VPTs), , A. General Conditions, I., The scope of this Agreement is aimed at operation and maintenance of all he, VPTs by the Universal Service Provider (USP) for which Agreement has been, entered into., II., The effective date of Agreement is 28th March, 2003., III., The validity of Agreement is 7 years from the effective date., IV. The subsidy under the Agreement is payable from the date of operation and, maintenance of VPTs or 01.04.2002, whichever is later, till the duration of the, Agreement

Page 3 : V., VI., , VII., , VIII., , Multi Access Radio Relay (MARR) VPTs, on their replacement will not be, eligible for subsidy under this Agreement., The Universal Service Provider may change the location of VPTs to provide, better access to the public within the same village. No payments for relocating, the VPTs will be made from USOF on the expenditure incurred on relocation., The USP shall be solely responsible for provision and operation of necessary, equipment and systems, treatment of subscriber complaints, collection of call, charges and issue of receipt thereof, & attending to claims and damages, arising out of operations., The USP shall work within the framework of the terms and conditions of the, basic service license., , B. Claim Submission and Settlement, The SSA-wise and technology-wise representative rates at which subsidy disbursable, are given in Part IV ‘Financial Conditions’ of the Agreement. For wireless, technologies, WLL rates of the SSA shall apply., The Agreement provided for review of representative rates in the third year of the, Agreement taking into account, inter-alia, the increase in the revenue on account of, provision of STD facility. There have been no changes in the representative rates, after review, which have come into effect from the fourth year of the Agreement., , For the purpose of disbursement of funds from USOF, first year ended on 31st March, following the date of commencement of Agreement., Subsidy claims are to be submitted by USP in four quarterly installments in the, prescribed form and the Annexure/Attachments thereto within 30 days from the close of, the quarter. The claims should be duly certified with an Affidavit by a representative of USP, duly authorized by a resolution of the Board of Directors., The quarterly statements of subsidy claims shall be required to be audited by the, Auditors of USP and the report of the Auditors to be filed with the Administrator within, seven days of the signing of the Audit Report but not later than 30th September of the, following year. Subsidy for a quarter shall be disbursed after making adjustments, if any, for, the payments made in the previous quarter., Final adjustments, if any, in respect of excess or shortage in the subsidy disbursed, shall be made in the following year based on the quarterly statements duly certified by the, Auditors of the USP., In case total amount disbursed for a financial year base on quarterly self assessment, claims of the USP results in excess payment by more than 10% of the actual subsidy due to, him, the entire amount of excess payment shall be recovered along with an interest at the

Page 4 : (PLR) prime lending rate of State Bank of India prevalent on the day the respective, disbursement was made., C. Other Condition, In cases of faults for more than 7 days in a quarter, the subsidy shall be deducted, proportionately for the total number of days VPT remained faulty during the quarter. In, cases, however where the VPTs remains faulty for 45 days or more in a quarter, no subsidy, for the entire quarter shall be allowed., With effect from the quarter ending 30.09.2004, VPTs that remain disconnected on, account of non-payment and VPTs that register no increment meter reading during the, entire quarter shall not qualify for any subsidy support for that quarter (vide letter no. 30101/2002-USF dt 14.09.2004)., Claims from QE December 2007 onwards should contain a list of NIMR/Closed/DNP VPTs, (vide USO letter no. 1-1/2007-USOF dated 19th November 2007)., Subsidy claim from QE June 2008 onwards should be certified by concerned GM/DGM, (TR) to the effect that information furnished in the claim tallies with billing record (vide USO, letter no. 1-1/2008- USOF dated 6th May 2008)., , D. Performance Bank Guarantee (PBG): Performance Bank Guarantee (PBG) shall be, furnished equivalent to the quarterly subsidy disbursable for the VPTs of all the SSAs, in the service area. Initially, the bank guarantee(s) shall be valid for a period of one, year and shall be renewed form year to year., The subsidy form the USOF shall be disbursed in four quarterly installments during, each financial year. Each installment shall be disbursed quarterly in arrears., , 7.8.2 REPLACEMENT OF MULTI ACCESS RADIO RELAY (MARR) VPTs-REPLACEMENT, BETWEEN 01.04.2002 AND 30.06.2003, A. General Conditions, I. The scope of this Agreement is to install new VPTs between 01.04.2002 and 30.06.2003 in, replacement of MARR VPTs and the operation & maintenance all such new VPTs by the USP, in the service area for which Agreement has been entered into. M/s BSNL is the lone USP, under this Agreement signed in March 2004., II. The effective date of Agreement is 1st April 2002., III. The validity of Agreement is 8 years and 3 months from the effective date i.e., 01.04.2002.