FINANCING HIGHER & TECHNICAL EDUCATION IN INDIA
* J. VEERARAGHAVAN
( Director, Bharatiya Vidya Bhavan, Delhi & Chairman, Advisory Board, Higher Education Unit of Apeejay Stya Education Research Foundation, New Delhi).

EXECUTIVE SUMMARY
We should be grateful to the Central Advisory Board of Education (CABE) committee (June 2005) for highlighting the grave deficiencies in investment in higher education and suggesting tripling of the annual government outlay from present .5% to 1.5% of GDP. However and despite political consensus, the limits to tax revenue and the cap on budget/fiscal deficit, as well as other demands on the budget will make this target difficult to achieve. Moreover the capital requirements of Higher Education may have been underestimated. Also even if the total annual government outlay on education is raised from present 4% (about 1,00,000 crores) of GDP to around 6%, considering the needs of other sectors of education, it is unlikely that Higher & Technical Education will get more than 1% compared to present .5% (12,500 crores). In these circumstances and for other good reasons, it is inevitable and necessary to promote private investment in Education in a positive and dynamic framework so that overall expenditure on education public and private rises to 9% and the share of private sector rises to 3% of GDP of which .5% will be on Higher and Technical Education.

The fact that the CABE committee has not given a target date implies that they want their recommendations to be acted upon immediately. I also suggest that a bold policy framework for promoting private investment in education should be announced and implemented at once. It should be positive and stimulating and provide for an accreditation system that will be cooperative and helpful in ensuring standards and equity. A large programme of investment in about 10000 colleges (one third of the system), perhaps with World Bank Aid and a Consortium of U.S. Colleges including community colleges is called for to upgrade the Higher Education system at its base to balance the agreements already envisaged at high end with 10 major universities in USA and for Agricultural Research & Education. Such a programme will enhance the quality and relevance of education in every part of the country and provide expertise and intellectual and moral leadership for transforming the base of the society and would supplement the forces of globalisation even while correcting some of its inequities and make India a truly developed society. It should be possible to arrive at a broad political consensus for the above strategy and programme.

FINANCING HIGHER & TECHNICAL EDUCATION IN INDIA

The large availability of highly educated and motivated manpower was an important factor contributing to the phenomenal success of India's IT software industry. There are many, like the recent McKinsey Report, who warn that the present growth rate cannot be maintained unless the supply of such manpower is accelerated. This is true of all sectors of the economy; higher educated manpower would provide both expertise and needed intellectual and moral leadership.

The neglect of Higher Education in the past is responsible for the relative backwardness in India of several regions and sectors of activity. The latest and perhaps one of the best to document the inadequacies of our Higher and Technical Education system is the report of CABE committee on financing of Higher & Technical Education presented to the CABE in June 2005. The committee's chairman was the Member in Charge of Education in the Planning Commission and include three Ministers of Education from States, several vice chancellors & education experts and DG, CII and has therefore special credibility. The Report of the committee draws special attention (page 22) to the ill-effects of past underspending (per student cost declined by 30% between 1990-91 and 2002-2003, resulting in faculty deficiencies, infrastructure inadequacies, poor support for research and declining scholarships). Apart from the deleterious consequences on quality & equity, even growth is inadequate in that the Higher Education system covers only 10% of relevant age group (15-24) whereas the report is of the view that at least a minimum of 20% should be covered (compared to over to 40% in many developed and developing countries).

Kudos to the committee for highlighting all this and calling for raising the current centre & state govts outlay on higher & technical education from the present 0.5% of GDP (2003-2004) to 1.5% of GDP (target date not specified) i.e. from around 12500 crores per annum in 2003-2004 to around 38000 crores or more. Even this will be inadequate, as capital investment needed in infrastructures do not seem to be adequately provided for in these estimates. Since the committee was asked to recommend a fair share of GDP that should go to Higher & Technical Education out of targeted 6% annual Government outlay on all Education, the committee's recommendation of 1.5% for Higher Education is contingent upon central and state governments raising their outlays to 6% from the present 4% (2003-2004).

This target of 6% of GDP for Education was first recommended by Kothari commission in 1966 which had accepted the then Planning Commission projection of economic growth from 1966 to 1986 at 6% annum. All of us know the actual growth was only half of that. In 1986 the National Policy on Education reiterated 6% of GDP for education as the goal without clarifying whether this was government outlay or it also included private contribution to education (Kothari commission had included private contribution also). Subsequent to 1986 all political parties have accepted 6% of GDP from govt funds as the necessary annual outlay on Education. Some of them have included this in their election manifestos.

When despite all this political consensus the actual outlay from government funds has not exceeded 4% over such a long period, surely there must be a structural problem or constraint. Since 1990s we have committed ourselves nationally and internationally to limit our fiscal and budgetary deficits and we take pride in bringing down these deficits. The tax base is narrow, much tax is avoided, much income is undeclared and there are obvious limits to how much can be provided for education, as security internal and external and several other sectors may need large funds. Economic growth & buoyancy in tax revenues do help but there are limits to taxation and therefore the Committee of CABE is unrealistic in recommending - "State funding of Higher Education out of tax and non-tax revenues will remain the best and the only sustainable way of financing higher education. This has both theoretical and empirical advantages. To increase the revenues of Government so that it increase its allocations to higher education, one may have to think of additional general and special taxes for higher education rather than looking at user charges like student fees." (pages 50-51 CABE committee report).

What makes this recommendation even more unrealistic is the fact that the committee assumes that 1.5% GDP (25%) of annual outlay can be earmarked out of 6% projected outlay for Education. This profoundly underestimates the needs of the secondary sector. Another report on universalisation of secondary education submitted to CABE at the same meeting, rightly projects the need of the elementary education at 4%, secondary at 2.5% and Higher at 1.5% which is possible only when the government outlay reaches 8% of GDP. If the outlay remains at 6% of GDP (a difficult goal in any case) the share of Elementary would be 3%, of secondary 2% and Higher 1%.

My recommendation is therefore that all political parties must arrive at a consensus in national interest to raise the non-government contribution in all sectors of education to as much as feasible so that over all we reach 9% of GDP as national outlay on Education with 6% from Government and 3% from non-government sector. When I talk of such contribution from private sector, I do not include in this expenses of transport, uniform, books and coaching classes. I include only institutional expenditure and contribution towards the same. I consider 6% from govt. outlay and 3% from non-govt sources more realistic. In higher education this means 1% GDP from Govt. and .5% from private. In 2003-2004 prices this means 25000 crores from government and 12500 crores from non-government in terms of annual outlay. In addition there could be need for substantial capital outlays from government and non-government sources. A few comments on the "debunking" of non-govt contribution by CABE committee would be in order (though they do recommend experimental & innovative efforts).

(a) Cost recovery. The committee feels that the ceiling should be 20% of the costs. But where the courses are relevant and are of good quality and lead to good jobs, students will be willing to pay 100% of the costs or even more. We need not fix a ceiling. A college or a university will have both market oriented and need based courses. The extent of cost recovery will vary from institution to institution and on mix of courses.

(b) Educational Loans. The committee seems to be against educational loans on grounds of equity. But if the loans are provided on the basis of recommendations of the educational institutions, (who should be given a quota for aiding poor students) this objection can be met. Recovery can be ensured through Tax Authorities by following the suggestion made by EPSI and others through a PAN number which will continue with the students after graduation.

(c) Industry & Philanthropic contributions. The committee feels only those institutions which get govt funding get these contributions. It also says that voluntary donations and contributions by private corporate sector is an important feature of advanced countries and our corporate sector is yet to learn this basic truth. But the past & present need not be replicated in the future; our corporate governance is learning fast and could become more socially oriented. They will realize wealth creation and corporate prosperity is better served by unconditional and wide distribution of contributions rather than funding of "family or corporate foundations" as has been the habit in the past.

(d) Private Investment in Higher & Technical Education. It is in regard to this that the committee report is most negative and most unrealistic. It declares - "A detailed regulatory framework has to be developed that would allow only genuinely interested private sector that has philanthrophy and education and not profit as the main consideration to enter higher education sector. Tendencies to open profit seeking private institutions need to be curbed altogether, lest higher education be subject to vulgar forms of commercialization. At the same time, philanthrophy in education which has rapidly declined to insignificant levels during the last two decades, needs to be encouraged by government through appropriate fiscal incentives. On the whole the overall growth of private sector in education cannot but be limited." (page 50). I think we should strongly disagree with this view and the mindset underlying the same. In fact the committee itself has stated at page 40 - "Currently private self-financing colleges in engineering and management education outnumber public institutions by several times. In absolute numbers and also as a proportion of the total government colleges turn out to be negligible. About 85% of engineering colleges in India are self-financing. In Andhra Pradesh there were 95 self financing private engineering colleges compared to only 11 government colleges. Similarly there were 303 self financing medical colleges compared to 25 government colleges. In fact the system of higher education in India is more privatized than in most developed countries. The casualty is not just equity, which is well known but also quality of education."I may add that the fastest growth in secondary education has been in private self financing schools and also in pre-primary and primary English medium schools.

The reason for growth and private investment in private professional colleges and other private self financing schools is that parents and students are willing to pay. Cash flow in these educational institutions is extremely good. As one person put it "In hotels, we pay after eating food, but in education we pay even before we enter (and we don't know what we will get)." There is in other words effective demand backed up by cash. But barriers to entry and restriction of supply have led to severe shortages of quality places resulting in black market and corrupt practices. The blame for this has ultimately to be borne by government which has failed to provide adequate opportunities even for meritorious students either through its own institutions or by encouraging private institutions.

This is not to deny that there are several deficiencies in terms of quality and equity in private institutions. These deficiencies in public institutions are even worse. To offer low cost low quality education is as great a cheating as high cost exploitation of students in the private sector.

ACCREDITATION & SELF REGULATION
A large number of accreditation bodies of experienced educationists each handling a limited number of both public and private institutions and working cooperatively and with educational institutions can contribute to the continuing improvement of academic standards, quality, relevance and equity. These accreditation bodies may be franchised by AICTE/UGC etc and can replace the largely irrelevant and ineffective and confusing inspectorate system that has been operating and has gained considerable insight into the problems, which insight they can provide to the accreditation agencies and coordinate, promote and regulate their work.

There is nothing more inequitable than denial of opportunities to meritorious students to pursue their desired course of studies. Special provisions for the backward and corrections for historical injustices are necessary but social justice cannot be provided on the basis of individual injustice. Both have to be tackled together and only a positive promotional approach and large scale enhancement of opportunities and removal of shortages of quality places can meet this situation.

The Hon'ble Supreme Court has reiterated the fundamental right of citizens to follow chosen professions; including the right to teach and to establish institutions for the purpose with reasonable restrictions for ensuring quality and equity. The Court has ruled that there can be no profiteering but a reasonable surplus may be made. 10 to 15% annually is considered reasonable surplus. These are equivalent to post-tax profits, after provision for depreciation on all other costs. The Delhi Government has permitted 10% school fees for creating a Development Fund. These are important guidelines which the private sector must accept and enforce in letter and spirit to create confidence in the public mind. These limits are quite reasonable. The private sector in education must also realise that education is a process and not a product and that final examination results or job offers or profits (which may be fortutious) alone do not indicate or guarantee good education. They must give up proprietorship attitudes, hire and fire practices, cost cutting and other dubious smart measures, allow academic autonomy and promote good educational climate.

Foreign Investment
Under GATS, National Treatment is an important principle. If we offer Higher Education as a service under GATS, we should be ready to accept universities from other WTO members to establish their branches in India so long as they conform to national laws for private institutes. We have not reached this stage as yet. Presently, bi-lateral agreements may be a better procedure to keep ourselves abreast of latest developments abroad and create a natural demand for our education by raising quality and relevance.

The recent agreement with USA which provides for 10 major universities in USA to collaborate with a number of institutions in India to upgrade research and learning is a good example. Of even greater relevance is the agreement for a "Ever-Green Revolution" under which a number of U.S. Institutions will collaborate with ICAR and Agricultural Universities and research centers.

These are 'high-end" collaborations, such as we had for IIMs and IITs in the past. However, what we need for system improvement is a large "low-end collaborative arrangement". One can visualize an agreement with World Bank credit or soft loan support and a consortium of U.S. Colleges including community colleges to upgrade let us say 10000 colleges in this country (roughly two thirds of the system) in terms of infrastructure, academic offerings, community interaction, promotion of small enterprises and educational and health services, training and extension facilities.

Foreign Universities in India
A debatable question is with reference to a number of universities operating in India via the FDI route. The committee suggests that foreign universities that enter India with a view to exploiting the situation here and essentially to raise resources need to be prevented. But another view could be that they enable many Indian students to obtain foreign degrees or dual degrees at much cheaper costs than going abroad to acquire degrees. The real answer to malpractice is to go after malpractices/ and not to stop practice as such. Because there are quacks, we do not abolish the Medical Profession. Certainly more regulatory work is needed in this area.

Industry and User Collaboration
Universities & colleges must alter their regulations to allow for active participation of industry and others using Higher Education Manpower in all aspects of academic planning, delivery of curriculum and evaluation. Industry & user agencies on their part must open their facilities for training, extension & research in collaboration with Higher Education institutions in the vicinity and also provide part-time faculty making their expertise and experience available to Higher Education Institutions.

Summing Up
Rapid economic growth brings with it many social conflicts and challenges as well as opportunities. Higher Education on an adequate scale and depth can be a powerful instrument for meeting these challenges and making the best of the opportunities. The present world wide upward growth of the economy may last upto 1915 or 1920. (Upward phase of 'Kondratiev wave' commencing from about 1990) and if by then we build a dynamic and quality oriented Higher Education system, we would be able to meet all the challenges with confidence. There is hardly any time to be lost and strong political leadership is needed urgently to move ahead at the required pace.