"It is a Rs 20,000 crore project and entire fund will be provided by central government," Telecom Minister Kapil Sibal told reporters at an event here.
"We have announced that by December 2013, broadband network across the country will be completed. The Memorandum of Understanding has been signed for around 1,40,000 gram panchayats. There are around 2.5 lakh gram panchayats in the country," he added.
Bharat Broadband Network Ltd will be responsible for the rollout of the project, to be executed by BSNL, RailTel and Power Grid.
Sibal said the 16 states account for 60 per cent gram panchayats in the country and the rest of the states will also sign the agreement soon.
State governments will have to provide approvals for laying of the optic fibre network and facilitate other measures for expeditious rollout of the network.
While speaking at the signing ceremony, Chief Minister of Uttarakhand Vijay Bahuguna and CM of Rajasthan Ashok Gehlot promised to extend all support to the central government for the project.
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"In Rajasthan, we have made 3 per cent budget provision for IT. We are making fast progress but that would not be possible without broadband connectivity," Gehlot said.
Other states which signed MoU included Uttar Pradesh, Andhra Pradesh, Arunachal Pradesh, Chattisgarh, Jharkhand, Karnataka, Kerela, Madhya Pradesh, Manipur, Mizoram and Tripura.
Three union territories Dadar and Nagar Haveli, Daman and Diu and Puducherry also sign the agreement.