Providing a fillip to the fastest growing telecom sector, Union Finance Minister P Chidmabaram on Tuesday enhanced allocations under Universal Service Obligation fund for rural connectivity by 25 per cent to Rs 1500 crore (Rs 15 billion).

Besides this financial assistance has also been extended to cellular telephony companies to allure them to go to rural areas for which he proposed an amendment in the current Telegraph Act.

The ministry of communications would bring a Bill in the Budget session to amend the Indian Telegraph Act in order to support infrastructure for cellular telephony in rural India, the FM said.

With rural teledensity at an abysmal low of two per cent against an urban teledensity of 23 per cent and an overall teledensity of 11.75 per cent, the proposals will go a step further and lay part of the proposed 50 mn rural connections in the next three years.

Chidambaram expects to bridge the digital divide between rural and urban India with the proposal to roll out 50 million phones in the next three years and thereafter telephone connection will be available on demand.

"The telecom sector in India is recording one of the fastest growth rates in the world. Tele-density stood at 11.75 per hundred at end-January 2006 and the ambitious target is to reach 250 million phone connections by December 2007. I am confident of success. I propose to provide Rs 1500 crore (Rs 15 billion) from the Universal Service Obligation Fund in 2006-07," Chidambaram said in the Budget.

In 2005-06, USO Fund had received Rs 1200 crore (Rs 12 billion) from the finance ministry.