Rejecting the Telecom Ministry's proposal for fast tracking Rs 20,100 crore National Optical Fibre Network (NOFN) by according it the status of a non-Plan scheme, Finance Ministry has advised Telecom Minister Kapil Sibal to obtain the Plan panel's clearance for the project.

"...a new scheme ... with an outlay of Rs 20,100 crore over a period of three years, whether under Plan or non-Plan side, required the same kind of administrative and financial approvals. Keeping this expenditure under Plan will not, therefore, cause procedural delays," Finance Minister Pranab Mukherjee said in a letter to Sibal.

The Finance Minister was responding to Telecom Minister's request to allocate funds for NOFN from non-Plan side to mitigate chances of delays in funding for the scheme which involves approval at various levels.

The Cabinet in October had approved NOFN scheme and creation of SPV to execute it.

Initially, the broadband project will be executed by state-owned Bharat Sanchar Nigam Limited (BSNL) and other institutions like RailTel. Later, PowerGrid and Gas Authority of India would also be made partners.

The fund management after allocation for this scheme will be done by Universal Service Obligation Fund. Administrator N Ravi Shankar of USOF has been made CEO of special purpose vehicle formed by cabinet to execute the project.

The Finance Minister said that continued funding of USOF expenditure from Plan side is based on the fact that the expenditure is development in nature and creation of such network will foster empowerment of rural masses.

"Such developmental expenditure should appropriately be met from Plan side." Mukherjee said.

He added that rural telecom connectivity including rural teledensity and broadband coverage is one of the six components of Bharat Nirman that are part of the Plan expenditure, except USOF.

"The expenditure of USOF has also been brought under Plan discipline in BE (Budget Estimates) 2011-12 to maintain this uniformity in consultation with Planning Commission," Mukherjee said.

The Finance Minister asked Sibal to modify the funding arrangement with the approval of Cabinet so that the expenditure on the scheme for creation of Optical Fibre Network for Broadband Connectivity to Panchayats can be met from the Plan allocations.

Mukherjee in this communication also asked the telecom minister to instruct the Department of Telecommunications to send the projections of funds for the scheme to Planning Commission for schedule allocation in Budget estimates 2012-13.