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Monday, February 29, 2016

Budget 2016 for Higher Education

We eagerly await this day. While the government works 365 days and announcements are made every day of plans and proposals and decisions, but a fairly significant number of them are announced in the budget speech. Also, while most other decisions of the government are discussed openly prior to them being announced, the budget announcements are somehow considered state secrets, and therefore, we don't have any inkling for many of them.

While I have generic interest in economy, my primary interest these days is finding out what is in store for higher education.

Let me start with what I consider as the most crucial announcement for higher education.

61. It is our commitment to empower Higher Educational Institutions to help them become world class teaching and research institutions. An enabling regulatory architecture will be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions. This will enhance affordable access to high quality education for ordinary Indians. A detailed scheme will be formulated.

This is important because of the realization that it verbalizes. That the regulatory architecture today does not support or empower rather hinder the higher educational institutions to become high quality. The institutions in India who provide high quality education do so not because of regulations, but in spite of them. UGC and AICTE can only think of specifying minimum standards through force, which end up becoming maximum standards for many educational institutions to achieve. UGC and AICTE do not understand that by having so much regulation, they are letting these institutions off without any accountability, since they simply have to follow UGC/AICTE regulations.

The second important aspect of this statement is that the government expects private institutions to emerge as world class institutions. Again, it is an important statement since for all these years, we have heard only one thing from regulatory bodies as well as from the government - that the private sector is poor quality, notwithstanding the fact that some private sector institutions like BITS Pilani and IIIT Hyderabad are outstanding in every sense of the word, and a large number of government institutions are really bad in quality. That narrative has been balanced to some extent. That most of the higher education happens in private sector is a reason enough to find ways to support private sector, and I am glad that a beginning is being made.

Of course, the devil is in the detail. How will these institutions be selected. What kind of regulatory support will be given to them. How will that support be worked out so that other institutions don't go to court demanding the same treatment to them. (And I hope, if the differential regulatory mechanism does help these 20 institutions, we will then not limit ourselves to just these 20, but could be more, many more.) Let this be an experiment in education regulation.

62. We have decided to set up a Higher Education Financing Agency (HEFA) with an initial capital base of `1,000 crores. The HEFA will be a not-for-profit organization that will leverage funds from the market and supplement them with donations and CSR funds. These funds will be used to finance improvement in infrastructure in our top institutions and will be serviced through internal accruals.

Are these top institutions same as the 20 in previous announcement. I hope not. I am hoping that this will lead to educational institutions getting access to loans cheaper than what banks would have given otherwise. Also, banks have not been giving long-term loans to educational institutions. They require payment in small number of years, which is not possible unless the fees charged are very high. This body, hopefully, will give loans on long-term basis. This should allow for improvement in infrastructure. Those pieces of infrastructure where there is a clear internal accrual like hostel would be easy to fund through this. But, of course, it is extremely important that loans are given only to worthy institutions. This body should not be stuck with bad loans.

63. To help Students, Higher Education Institutions and Employers to access degree certificates of candidates, it is proposed to establish a Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets, on the pattern of a Securities Depository. This will help validate their authenticity, safe storage and easy retrieval.

This is something that I have been hearing for a decade. Fake degrees and certificates is a serious problem, and as a result, the number of agencies who want these things to be verified is increasing by the day. For some institutions, the verification process has become a profit making venture, but for most institutions, it is a pain to reply to a large number of verification requests. But I don't know what has been the problem all these years. This seems like such a simple idea which should have been implemented long ago. But anyway, I hope this announcement will actually be implemented before the next budget speech.


There are several other announcements which are related to skill development and building companies. These are all good things, very much needed to take advantage of the so-called demography dividend, but I would consider them outside the scope of this blog.

On the other hand, I am very disappointed by the amount of money allotted to MHRD. The actual expenses in 2014-15 was Rs. 68,875 crores. The revised estimate for 2015-16 is Rs. 67, 586 crores, and the budget estimate for 2016-17 is Rs. 72,394 crores.

Notice that in 2014-15, the budget allocation was significantly higher but later the government slashed the budget.  In 2015-16, there is another reduction in budget. And in 2016-17, while nominally there is a 7% increase in allocation, we have to see whether we will see reduction in actual expenses that we have seen in both 2014-15 and 2015-16. Even if there is no reduction and the entire budgetary allocation is spent, a 7% increase will not even take care of inflation and 7th pay commission raises, not to mention the increased expenditure on setting up of new IITs/NITs and other institutions that have been announced in the last couple of years. There is also major expansion taking place in the university system. So if we look at the budget on a per-student or a per-teacher basis, there is a third continuous year of decline in funding of higher education.

This is extremely serious. I do understand that there is greater amount of resources being shared with states and the state governments are supposed to spend more on education, but even with that, it is going to pinch at least the central government institutions which do not get any funding from states. It will only put pressure on the government to allow higher tuition. IITs have already demanded that tuition be raised sharply, and with this budget, it would be difficult to not agree to those demands.

Institutions which can diversify their revenue sources will become stronger over a period of time. The budget for the last two years and the proposed one for the next year should convince every administrator in the higher education sector that the priority of this government are more in terms of skill development and they have to live with reduced support. Skill development is, of course, extremely important, and it is a much more important merit good than higher education is. So no complaints really, except that I believe that money could be found for both skill development and education. They should not be considered either-or. Institutions should become more aggressive in raising philanthropic funds, including from alumni as well as CSR funds from industry.

Overall a mixed bag. A couple of exciting announcements and I hope the details will be worked out soon. The budget on the other hand is much less than what was expected.

Added Later:
I have been told that though the overall increase in the MHRD budget is minuscule, the increase in higher education budget is good, while the budget for school education has been cut.
I would request readers to put such information as comment and don't be shy. But, of course, if you don't want to write on the blog, I will post important information that I receive on email.



Amitabha Bandyopadhyay said...

1000 crore loan account for the entire MHRD set up? Even if it is only 20 of them, it is 50 crore per!

prabha said...

Funding private institution should not be done by government. The entrance exams like JEE is conducted by govt. This private inst. like BITS, VITS and other inst are not ready to use results of the entrance exam of the government like JEE Main or advanced. Further some of this inst. deliberately start the admission procedure take money(fees), certificates much early than the admission of govt inst. If they want government money then why they should not keep their seats along with govt allotment system for another 10 years. Also will they follow reservation system if government funds are given to them.

Dheeraj Sanghi said...

@Amitabha, we are talking of loans and not grants. Not many institutions would have credit-worthy projects which can cause internal accruals for even 5 crores.

iitmsriram said...

About the academic records depository, I believe this is going to happen now. IITM has been asked to pilot and we are looking to do this starting end of this academic year, through NSDL. I don't know what happened to the similar effort that IITK was supposed to start about five years ago (with Prof. Dhande).

Dheeraj Sanghi said...

@Sriram, Prof. Dhande had prepared a report, and must have submitted it to MHRD. That too talked about NSDL handling it, instead of creating another agency or outsourcing it to a private sector body. My own view is that we should encourage having 3-4 players in the market. (Even for stocks, we have two.)

prabha said...

IIT Fee May Be Revised From Rs. 90,000 To Rs. 3 Lakh Soon
what will be opinion of Prof Sanghi

Dheeraj Sanghi said...

@Prabha, It is complicated and devil is in details. We don't want subsidy for those who can afford it, but at the same time, what kind of loan scheme will be available who can't afford it. If we look at the current education loan schemes, the EMIs will be of the order of Rs. 20,000 which will be too high for a lot of students and certainly for those who want to go for higher education. On the other hand, higher fee does give significant resources to IITs, and also it allows other fine institutions to raise fee as well and enable them to improve their offerings. The current education policy in which we exclusively worry about costs and only pay a lip service to quality is deeply flawed.

Amit Ranjan said...

As mentioned by Director of IIITD in one of his posts, deferred fee payment can be adopted by IITs. What's your opinion on that and how would it be feasible in IITK case.

bharuchi said...

Will HEFA will play role of UGC ? The govt is going to abolish UGC / AICTE ??

Dheeraj Sanghi said...

@Amit, the deferred fee model is simply saying that the maximum amount to be paid in a year is capped by a formula based on income, and hence a graduate is free to go for careers which are less paying. In real world, which ever agency provides the initial funding (say a bank), would have to be compensated for the difference. That is, if the loan repayment is 1 lakh, but since I am in a low paying job, I can only pay 50K, then someone needs to pay the remaining 50K to the financial institution. I think it is possible to work out the details, but the details would be extremely important to really comment on that scheme.

Dheeraj Sanghi said...

@Bharuchi, HEFA is giving loans and not grants.