The government has disbursed Rs 250 crore from the Universal Services Obligation fund to fixed line service providers for meeting operational expenses in providing village phones. This is the first disbursement from the USO fund since it was set up last year.

"Around Rs 247 crore has gone to Bharat Sanchar Nigam Ltd because it is operating the maximum number of village phones. Private operators, which have set up around 8,000 phones, have got the remaining amount," Shyamal Ghosh, administrator of the fund, told Business Standard.

Ghosh said the government was preparing for the second phase of disbursement to support the capital expenditure of operators in setting up village phones. This will involve a multi-stage process in which operators bidding the lowest amount will be offered a project to set up a village phone in a particular short-distance charging area.

The fund administrator is also working on a benchmark amount for each SDCA, which will act as a floor for bidding companies.

Meanwhile, the Comptroller and Auditor-General of India has pulled up the government for its unsatisfactory implementation of village public telephony.

"Progress was tardy and far below the targets. The disturbing fact is that a very high proportion of the public telephones installed were non-functional," the CAG report said.

Of the 97,806 connections allotted to the private sector, only 8,000 have been completed. The six operators, including HFCL, Bharti Telenet, Tata Teleservices, Reliance Telecom, Shyam Telecom and Hughes Tele.com, had committed to set up 97,806 village phones within three years of commencing services.

However, despite most of the firms starting operations between 1998 and 2000, they are nowhere near completing their commitment.

BSNL, on the other hand, has covered more than 500,000 villages, and has another 35,000 to complete in 2003-04.