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National Policy on Education: Issues in Financing of Higher Education in India

By Jandhyala B G Tilak, National University of Educational Planning and Administration, New Delhi.

The first national policy on education was formulated in 1968, 18 years after development planning in the newly independent India was launched.  It was exactly 18 years later that the second national policy on education was formulated in 1986, which was then marginally revised in 1992. During the last few years, the need for another national policy on education has become increasingly felt, given the significantly changing landscape in all spheres of development, and in the education sector in particular.

In the absence of any new policy, during the last couple of decades changes in the education sector were introduced with executive orders and uncoordinated initiatives. Immediately after coming to power, the current government indicated that it would come out with a new national policy on education.

This short note focuses on higher education, and especially on the financing of higher education. Higher education is widely acknowledged as an important public good, and as a social responsibility. Because of its direct relationship with development, and more importantly the externalities[i] it produces, state funding of higher education assumes critical importance. It is necessary that the state makes a firm commitment to the funding of higher education. It has been repeatedly reiterated that we should spend at least six per cent of GDP on education, as stated in the 1968 National Policy on Education, and 1.5 per cent on higher education, as recommended by the Committee on Financing of Higher Education of the Central Advisory Board of Education in 2005. While there is need to revisit these targets, these may be viewed as minimum targets for the immediate future.  These resources need to flow out of general and specific tax and non-tax revenues of the government (at central and state levels). Presently less than about four per cent of GDP is allocated to education.

There should be a proper sharing of responsibilities in funding higher education in India between the union (central) and state governments. While the central government, directly or indirectly through the university grants commission (UGC), fully funds the central universities, only the development expenditure of state universities and colleges is funded by the union government. Recent commissions / committees (e.g. National Knowledge Commission, Yashpal Committee) have suggested that the union government should fund state universities and colleges as well, beyond only covering development expenditure.

The higher education sector needs to be adequately funded keeping in view the goals relating to expansion, improvement in access of marginalised groups, the improvement in quality to an acceptable level, and the achievement of excellence in a large number of selected institutions. Before expanding further the higher education system with new universities and colleges, it is necessary to ensure that the existing institutions are reasonably well developed and are put on a sound financial footing. Like the ‘operation blackboard programme’,[ii] it may be required to launch a similar programme to ensure investment in needed basic infrastructure facilities in all institutions of higher education.  To promote quality and excellence, substantial resources need to be allocated to promote research in all universities and other institutions of higher education. Reasonable proportions of budgetary allocation to higher education need to be committed to research and also to scholarships to promote equity and merit.  The flow of funds to the higher education institutions needs to respond to the varying needs of different institutions on the one hand, and the performance of the institutions on the other.

A related issue that one has to examine is: whether it is justified to allocate public funds to private universities and colleges, which are defined otherwise as ‘self-financing’ and are treating education as a ‘business’, as the Yashpal Committee observed rightly.  The issue becomes particularly important as state resources are not enough to adequately finance even the public institutions of higher education. So financing of private institutions may mean ‘public pauperization and private enrichment.’

Since higher education produces a wide set of social benefits to the whole society, there is no justification to expect the higher education institutions to significantly rely only upon student fees.  Earlier committees constituted by the UGC and the All-India Council for Technical Education have suggested allowing these institutions to generate about 20 per cent of their budget requirements through student fees and other sources.  A Committee of the Central Advisory Board for Education (2005) has suggested that this 20 per cent may be seen as an upper limit so that equity considerations of higher education are not traded off.

Similarly, while student loans are becoming increasingly popular, these also cannot be seen as a reliable method of financing higher education on a large scale. The adverse effects of student loans on students’ attitudes and approach towards higher education and the values that these loans  impart, besides its accentuating role in commercialization of higher education, need to be carefully examined before further expanding loan programmes.

Strong higher education systems are created in some developed countries with liberal funding by the state and equally liberal funding by the society at large, specifically through donations and endowments from the corporate sector and individuals, including alumni. In some of these countries, student contributions in terms of fees constitute a relatively minor source of overall funds. It is necessary to develop a framework in India that promotes this missing source of funds – the non-state and non-student sector.  Besides trying to link some of the provisions of the Corporate Social Responsibility Act specifically to the higher education sector, innovative measures to promote individual and corporate donations and endowments to higher education need to be found.  A proper system of matching grants to higher education institutions needs to be put in place.

Lastly, at least a 10-20 year plan of funding of higher education that corresponds to a long term plan of higher education development in the country needs to be produced, based on sound principles of financing of higher education.  Such a plan should assure the higher education institutions of a steady flow of funds for a 10-20 year period, with sufficient provision for rewards and punitive action. This might also require that every institution prepares a sound, feasible long term plan for development.

Jandhyala B G Tilak is a Professor at the National University of Educational Planning and Administration, New Delhi, India. Email: jtilak@nuepa.org

This blog is based on an article in the forthcoming issue of NORRAG NEWS on ‘Financing Education & Skills’, due out in May 2015 at www.norrag.org

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NORRAG (Network for International Policies and Cooperation in Education and Training) is an internationally recognised, multi-stakeholder network which has been seeking to inform, challenge and influence international education and training policies and cooperation for almost 30 years. NORRAG has more than 4,200 registered members worldwide and is free to join. Not a member? Join free here.

[i] Externalities here refers to the public socio-economic benefits that result from higher education.

[ii] ‘Operation Blackboard’, outlined in the 1986 National Policy on Education, and commenced in 1987 aimed to upgrade physical facilities in primary schools across the country.

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