New Delhi: The Cabinet Wednesday cleared the long-pending compensation of Rs 1,250 crore for public sector telecom company BSNL to support rural landline connections installed before April 1, 2002.


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The subsidy will be given to the state-run firm after an amendment in the Indian Telegraph Rules (ITRs), 1951.


"The Cabinet approves subsidy of Rs 1,250 crore to BSNL as compensation for deficit incurred by BSNL in operating rural wireline connections," said Frank Noronha, the government's principal spokesperson, on Twitter.


The BSNL subsidy support will be given from the Universal Service Obligation Fund (USOF) for the rural connections installed prior to April 1, 2002, he added.


The telecom operator had asked the government to provide Rs 2,000 crore to support rural wireline connections.


On the basis of the submission from BSNL and the detailed information in respect of working rural wireline connections installed before April 1, 2002, the deficit per rural wireline connection was estimated at Rs 4,876 for 2011-12.


Accordingly, the deficit from the rural wireline connections installed before April 1, 2002 for 2011-12 and 2012-13 were estimated at Rs 1,593 crore and Rs 1,265 crore, respectively.


The Department of Telecom had paid subsidy for these connections to BSNL up to July 17, 2011.


Based on the trend at that point, regulator Trai estimated subsidy of Rs 1,500 crore for 2011-12 with effect from July 17, 2011 and Rs 1,250 crore for the subsequent year effective July 18, 2012.


BSNL has received Rs 1,500 crore subsidy and the Cabinet approved the pending amount of Rs 1,250 crore today.


"Full/lumpsum amount of Rs 1,250 crore shall be disbursed consequent on necessary amendment of the ITRs and signing of USOF agreement with BSNL," an official statement said.


In order to make BSNL eligible for subsidy funding on nomination basis from USOF, amendment is required in Rule 526 of the Indian Telegraph Rules (ITR), 1951.


It stipulates that the criteria for selection of universal service providers shall be made by bidding process from among eligible entities for implementation of USOF schemes. Corresponding Amendment in Rule 525 will also be required, the statement said.


Also, the subsidy support of Rs 1,250 crore will be the last and final payment and no further request from BSNL for financial or subsidy support from USOF on this count shall be considered, the statement said.


A total of Rs 8,692 crore has been extended as USOF subsidy support till date for the rural wireline connections installed by BSNL prior to April 1, 2002, it added.