The Prime Minister's Office, which is involved in evaluating the scheme, is likely to drop the idea for now.
Earlier, there were reports that Prime Minister Manmohan Singh was expected to launch the scheme to provide free mobile connections to six million poor families at an estimated cost of 70 billion rupees on India's Independence Day, August 15.
The Finance Ministry has reportedly come up with strong objection to the scheme, saying the government which is struggling with the shortage of funds cannot afford such a scheme, the Economic Times has reported citing ministry sources.
The scheme, named "Har Hath Mein Phone" meaning "a phone in every hand," was meant to provide mobile connectivity to six million households or 354 million people living below the line of poverty. The beneficiaries would get one cellphone with 200 minutes of free talk time and the project reportedly would be financed partly by the bidder and partly from the Universal Social Obligation (USO) fund, intended to provide affordable telecom services to people living in remote and rural areas.
The Finance Ministry and the Telecommunication Department questioned the funding for the scheme. The government's reported move to source the project fund from the USO may hit technical hitch as the said fund is for increasing the tele density in rural areas and the new scheme covers both the rural and urban areas, ET report has said.
The scheme proposed by the Planning Commission is being criticized since it is seen as the ruling United Progressive Alliance's attempt to woo the voters before the 2014 general elections.
The opposition BJP has come strongly on the government terming it as an "election gimmick" and equated it with election freebies like television sets and saris given by some of the regional parties during the state assembly elections in 2011.
"First, electricity should be provided to people in villages. Without electricity, what is the use of free mobile phones," asked BJP leader Balbir Punj, according to a PTI report. Interestingly, the BJP had a similar proposal in its vision document in 2009.