Improving quality and fostering excellence is a major challenge that Higher Education Institutions (HEIs) face today. The institutions are required to attract and retain competent faculty, raise teaching standards, encourage cutting edge research and nurture talent. Institutions therefore require massive investment in quality education, which depends on the national efforts to mobilise required financial resources from diverse sources for meeting the rising costs of education, training and research.
In this context, the Union Budget not only provides a statement of revenue and expenditure for various growth-oriented schemes but also presents the proposals for raising and allocating resources for financing priority areas of development, including higher education and entrepreneurial training. It may therefore be worthwhile to examine as to what may be expected from the forthcoming Union budget 2018-19 for financing higher education.
Higher education (HE) is provided through complex public and private partnership with different types and levels of institutions offering a wide range of technical and professional educational programs.
HEIs established by the Central and state governments receive a major chunk -- 60 to 80 percent -- of budgetary support by their respective governments. Of late, most of them are, however, becoming less dependent on the government as they are gradually moving towards costs recovery through upward revision of fees and offer of self-financed courses. In effect, thus, privatisation of education is increasing even in public sector institutions.
The private sector HEIs is entirely financed from the collection of tuition fees and other charges. Education in such institutions is cost prohibitive and therefore most students avail of bank loans to finance their education. Education loans interest burden is subsidised for students from lower income group.
A vast majority of the institutions, 63 percent, are self-financing institutions. And, private not-for-profit institutions are growing the most rapidly.
Revenue and expenditure data relating to private HEIs are not available for objective analysis and for drawing relevant inferences. We, therefore, confine our discussion to public sector HEIs, which receive budgetary support from the Central government.
Public expenditure on higher education
The trend in budgetary allocations reveal that at least 42 percent of the total education outlay is earmarked for higher education -- general and technical. This share comes to Rs. 29,703 crore (revised
estimate) for 2016-17, which is less than one percent of gross domestic product (GDP). This level of expenditure on higher education is considered inadequate for promoting quality teaching, research and innovation to match the levels obtained in countries with which India’s educated youth have to compete in the globalised economy.
The Central government has established overtime a number of HEIs, namely the Central universities, IITs and IIMs but these institutes have not been strengthened in terms of required facilities for quality education and research. At least 50 percent of HEIs are hardly operational in terms of required infrastructure including staff and other students support services, as per stipulation of regulatory bodies, namely UGC.
Shortage of faculty
In a meeting with the President Ram Nath Kovind on 6 January 2018, the Vice Chancellors of 17 new Central Universities discussed teething issues faced by them. The Central Universities set up after the year 2009 in Rajasthan, Tamil Nadu, Karnataka, Haryana, Kerala, Orissa, Punjab, South Bihar, Jharkhand, Kashmir, Himachal Pradesh, Gujarat, Uttrakhand, Madhya Pradesh, Jammu, Motihari and Bilaspur are facing uneven pace of campus development and faculty shortage. These universities are facing an acute shortage of teachers with at least 30 percent of faculty positions lying vacant at each institution.
The situation of Central University in Odisha is disastrous with about 84 percent of faculty posts vacant. Similarly, central universities in Himachal Pradesh, Haryana and Karnataka have over 60 percent – 75 percent of faculty posts vacant. This fact is also admitted by Minister of Human Resource and Development Prakash Javadekar who revealed that over 53 percent of faculty posts are vacant in Central universities and 35 percent faculty positions are vacant in IITs.
Clearly, with a large number of vacant faculty positions for several years, which are not filled due mainly to insufficient allocation of funds, quality of teaching and research is unduly compromised. The question is: Will the Central government provide for necessary funds commensurate with requirement for recruitment of faculty and other supporting facilities? We expect that when the Union Budget is presented on 1 February, 2018, this issue will be addressed.
Finance Minister Arun Jaitley, in his Budget Speech 2016, underscored the need for fostering excellence in higher education and research. He stated, "An enabling regulatory architecture will be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions… We have decided to set up a Higher Education Financing Agency (HEFA) with an initial capital base of 1,000 crores”. In this context, a baby step has been taken as the process of identifying ‘Institutions of Eminence' has just begun. And, let us hope that it will get a boost in the forthcoming Budget and the outcome of this initiative will be reported.
States’ sector HEIs
The case for increased financial allocation for the flagship program, namely the Rashtriya Uchchatar Siksha Abhiyan (RUSA) is equally strong. This scheme was designed and implemented in 2013 to provide strategic funding support to states’ sector higher education institutions for improving access and quality. Even though the states’ sector institutions enroll as high as 95 percent of students in higher education, the allocation for this scheme has already been downsized to the extent of 80 percent. This is of course adversely affecting the states’ sector universities and the colleges, which have been receiving plan assistance from the UGC. It is difficult to speculate at this juncture if the allocation for RUSA would be reversed to the previous levels or even increased to improve internal and external efficiency of HEIs.
Growth of self-financing institutions
With a view to reducing financial burden of funding higher education, the Central government has encouraged establishment of a number of self-financed institutions (123), known as ‘Deemed to be University’. Likewise, the states have deliberately encouraged the private sector to establish self-financing universities for augmenting opportunities for higher learning.
The establishment of private universities and colleges is viewed as a profitable venture; and, proliferation of such institutions tends to promote commercialisation of education. Almost all the known business houses and industrialists have established their own colleges and universities with the support of political parties in power.
In fact, privatisation of higher education has grown so much so that over 80 percent HEIs are under private management, which enroll over 60 percent of students. And, this trend is rising, even though at least one-third of approved seats in technical and professional disciplines remain vacant. The implication of this trend is further deceleration in government support for strengthening HEIs and increased dependence on private and self-financed courses, which may tend to perpetuate educational disparity among poor and rich. Will the fiscal policy address the issue of adverse impact of privatization of education on economically backward communities?
Burden of student loans
The size of expanded private HEIs indicate that the funding for HEIs comes from private sources, primarily the tuition fees that students and their families pay, often with the help of loans borrowed from the financial institutions.
The Indian Bank’s Association (IBA) has rolled out a comprehensive educational loan scheme. The student loan scheme is included in one of the 16 sectors of the priority sector lending of the commercial banks, which includes public, private and foreign banks.
The student loan scheme is extremely popular as evident from the increase in users, as many as nearly 3.0 million students, most of whom pursue technical, professional and management education avail of loan facility. It is also been observed that:
a) Education loans policy caters mainly to students enrolled in private institutions that offer jobs and market oriented courses;
b) According to Indian Bank’s Association (IBA), the total outstanding amount of education loan at end of the fiscal 2016–17 was Rs 67,678.5 crore out of which Rs 5,191.72 crore was NPA;
c) The bulging size of outstanding loans, an average of over 82 percent for the last five years -- 2010 to 2014 -- raises serious questions regarding sustainability of loan policy; and
d) Non-Performing Assets (NPAs) contributed by education have grown from 5.7 percent to 7.67 percent at March-end 2017.
A high ratio of outstanding loans or non-recovery of students’ loans is a pointer of inefficient management of loans, which has potential for not only destabilizing the lending banks due to rising NPAs but also to provoke unemployed beneficiaries to demand for loan waivers as given to farmers in different states. It may be recalled that in 2009 the then Finance Minister had extended relief on account of the accumulated interests burden of students’ loans.
In view of the inability of most beneficiaries to pay for loans due to unemployment or underemployment, they might express resentment against the job creation policies that may have political repercussions. This, therefore, calls for addressing the issue of education loans to alleviate the burden of the lending Banks and beneficiaries of education loans. In this context, Income Contingent Loan Policy, which is considered progressive and superior to the existing students loan scheme, may be adopted. Will the Finance Minister pay attention to this issue?
The scope of fiscal concessions, such as tax incentives for investment in education by students, parents and other donors should be made duly attractive. Currently, only deduction of interest is allowed under Section 80E of the Income Tax Act. Deduction of Principal Loan Repayment should also be allowed as a deduction under section 80E as is currently permitted for home loan repayments u/s 80C of the Income Tax Act.
Currently only deduction of Tuition fees is allowed under Section 80C. Deduction of expenses other than tuition fees relating to education should also be allowed as a deduction under section 80C
The Central government collects this Cess to augment additional funds for investing in secondary and higher education since 2004. Accruals from the cess were to be utilised for promotion of ongoing schemes for secondary and higher education, mainly for expansion of facilities to improve access and quality of teaching, research and innovation. But, this has not happened. Why?
On the basis of the findings of the Comptroller and Auditor General (CAG), it is reported that “the top government auditor also expressed concern that even though Rs 7,885 crore was collected through the research and development cess during FY97 to FY17, only Rs 609 crore (7.73%) was utilised towards the objectives of levying the said cess”.
In its report to the Parliament, CAG has observed that:
• Central government in the last 10 years collected Rs 83,497 crore by way of secondary and higher education cess between FY07 and FY17, but funds were not utilised for fulfilling the commitments made in the Finance Act for promotion of secondary and higher education. CAG has noted that “the commitment of furthering secondary and higher education cess as envisaged in the Finance Act was not transparently ascertainable,”
• Even though Rs 7,885 crore was collected through the research and development cess during FY97 to FY17, only Rs 609 crore (7.73 percent) was utilised towards the objectives of levying the said cess.
Clearly, available funds have not been utilised for the purpose for which budgetary allocation was made. It may be hoped that the government will take corrective action in this regard to do justice with HEIs.
Build entrepreneurial ecosystem
The instrument of fiscal policy may be used to change the abysmal state of education system, which churns out millions of adults equipped only for menial work. The workforce is woefully unproductive. It is imperative therefore to create conditions for promoting entrepreneurial education and training. In view of large pool of educated job seekers, the focus of educational funding policy should be to strengthen HEIs to quickly reorient their degree programs to blend the traditional economic and business courses with the practical experiences and operational challenges faced in the working world. The issue therefore is how to improve entrepreneurship education, training and skills.
Entrepreneurs innovate, bring new products and concepts to the market, improve market efficiency and create new value for customers and shareholders in the market. They are the drivers of economic growth and employment generation. The HEIs would therefore require developing entrepreneurial skills for leadership, creativity, marketing, sales, financial management and a wide range of interpersonal skills. In the broadest sense, HEIs will have to take up research and innovative activities, which leads to the creation and management of a new organisation for augmenting economic and business opportunities.
To encourage entrepreneurship in students, universities must offer more practical coursework, blending the theory in the traditional academic literature with the tangible needs of everyday business and technology management. The entreprenurial education should be experiential, hands-on, and action-driven to give students a real-world experience. Without reasonable financial support and government’s pressure, HEIs would not be able to effectively respond to the challenge of building entreprenurial ecosystem. Hopefully, the Finance Minister will suitably address this issue.
To conclude, efficiency and equity considerations make a strong case for the beneficiaries of higher education making a greater contribution to realise the goal of Sabka Sath, Sabka Vikas. They would also allow government funding to be targeted more effectively to support potential entrants from lower income backgrounds where participation has been persistently low, despite government’s educational subsidy to deprived groups.
Innovative and diversified methods of augmenting additional resources for investment in higher education are critical for promoting entrepreneurial education, training and skills development, which in turn has significant bearing on economy and the society that are increasingly knowledge intensive and propelled by new technologies.
Will the finance minister refrain from making populist announcements and establish a healthy precedence to present a pragmatic Union Budget that should enable us to reap the benefits of ‘population dividend’ in the foreseeable future?
For full coverage of Union Budget 2018, click here.
(The writer is Advisor, Yes Global Institute & Former Member UGC)
Updated Date: Jan 17, 2018 12:22 PM