Govt‘s free mobile scheme opposed by Finance Ministry

The finance ministry will strongly object to a plan to gift mobile phones to every family below the poverty line (BPL) on grounds that cash-strapped government cannot afford the Rs 7,000 crore scheme, a top ministry official told ET on condition of anonymity.

The Prime Minister's Office (PMO) is believed to be evaluating the Planning Commission scheme, known as Har Hath Mein Phone, under which cellphones would be doled out to over 70 million BPL households along with 200 minutes of free local talk time. According to news reports earlier this week, the scheme might feature in the prime minister's Independence Day speech to the nation. But officials in the PMO say the scheme would not be announced on August 15.


According to Planning Commission estimates issued in 2012 based on a 2009-10 spending survey, India has 355 million poor households. Assuming a family of five, this means 71 million households. The figure of Rs 7,000 crore appears to have been calculated assuming a price of Rs 1,000 for each handset.

Some reports have suggested the government could dip into the Universal Service Obligation Fund to pay for the freebie, but a finance ministry official said even that requires North Block's approval. Moreover, this fund is meant for increasing teledensity in rural areas while the proposed scheme would cover both urban and rural poor. An official in the department of telecommunications said the plan to gift free mobiles was not suggested by them. They were not even consulted about it, the official said.

The scheme has some serious backers in Congress, who feel this could be one way of reconnecting with voters. The Congress-led UPA government, battered by allegations of corruption, is widely believed to be on a sticky wicket ahead of parliamentary elections in 2014. The proposal is similar to state schemes in Tamil Nadu and Uttar Pradesh, in which consumer durables such as colour TV sets have been handed out to sections of the population and could be marketed as a major empowerment initiative of the government, according to this section of Congress.

However, a senior leader in the party points out that the scheme could backfire since the priority should be to address more serious issues, such as power shortage. "What use is a mobile if there is no electricity to charge it? It would seem insensitive to go ahead with something like this, especially when the government says there is no money to fund its food security plans," says the Congress leader.

The budget had projected a fiscal deficit of 5.1% of GDP. The finance ministry is keen to stick to this target in the wake of threats from rating agency Standard & Poor's to downgrade India.