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Financing of higher education
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To meet the challenges of the 21st century and to acquire a competitive edge, the higher education system has to transform to make it more socially relevant, information and technology oriented, diversified and of high quality. The skills and specialisation of graduates produced by our system should match the real needs of the productive sectors in the market place and the changing needs of our society.
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AS WE enter the new millennium, the world economy is experiencing an unprecedented change. New developments in science and technology, competition, media revolution and internationalisation are revolutionising the education sector. We are witnessing paradigm shift in higher education, from `national' to `global education,' from `state controlled' to an `open market economy,' from `general education' to an `educational system driven by market forces,' from `one time education for a few' to `life long education for all,' from `teachers centred' to `learner centred' education. These changes make new demands and pose fresh challenges to our established education systems and practices and, therefore, a time has come when we have to re-appraise their role and functions, the present administrative structure/ finances of university management.
In India, over the last several years there has been a phenomenal increase in enrolment. The number of universities increased from 28 in 1950-51 to 224 in 1996 and colleges from 695 to 8,613 during the same period. The student population increased from 2.5 lakhs to over 60 lakhs while the number of teachers increased from 12,000 to 3,00,000. We have now 238 universities, over 11,000 colleges and 3,42,000 teachers with a total student enrolment of nearly 7.5 million. It may however be pointed out that while India has the second largest system of higher education, next only to the U.S., the total number of students hardly represent 6 per cent of the relevant age group aged between 18 and 23 years, which is much below the average of developed countries (47 per cent) and less than that of developing countries which is 7 per cent.
When we look at university finances around the country, we see a familiar landscape. Bulk of the funds received by both Central and State universities is from public sources. Private contribution to education in the form of donations and endowments, which were the hallmarks of the pre-Independence period, has dwindled. The internal resources of universities have been dwindling as a percentage of their annual maintenance expenditure. Investment in higher education is far too inadequate. Cost recovery from students has not kept pace with the requirements. Most of the expenditure is on salaries, especially on the non-teaching staff, which in some universities number five times the teaching staff. Salaries and perquisites have grown precipitously with no corresponding reduction in numbers.
Faced with financial crises coupled with competing demands for funds for different sectors of the economy, the State and Central Governments have not been able to allocate adequate resources for higher education. We are far behind the target of spending 6 per cent of the GNP on education as recommended by the Education Commission (1964-66), and in the recent years the relative share of higher education in the allocation of funds has also declined, primarily due to resource constraints. Although, the overall government contribution has been increasing throughout the plan periods, it has not kept pace with the rapid rise in enrolment and escalation in prices. Often inadequacy of financial resources leads to poor infrastructure and physical facilities, low investment in research and development, having adverse impact on the quality of the higher education system.
Multi-pronged strategy
A situation like this calls for a multi-pronged strategy. First, universities must reduce their staff drastically. In the report of 5th Pay Commission, it had been recommended that an annual three per cent reduction in staff strength could be effected without recourse to retrenchment, merely by failing to fill the last vacancy in a cadre after all the promotions have been made. In other words we can reduce the numbers by 30 per cent in ten years which is not an unreasonable objective to attempt at. The ratio of teaching and non-teaching staff should ideally be 1:1.5, the norm which some of our IIMs and IITs are trying to achieve. There will have to be a massive outsourcing of various activities like security, sanitation, messenger services, transportation, data entry, maintenance of buildings, etc. This is likely to promote efficiency and reduce staff expenses.
In view of the resource crunch, to optimise cost effectiveness, it may be necessary to have assessment of performance in relation to the set objectives. Financial assistance to universities should be based on vigorous assessment of their performance. The present "covering the deficit" approach of university funding discourages saving, economy or generation of internal funds. We all know that budgeting based on last year's actual rewards those who are extravagant and can build a high base-level of expenditure. If the funding is based on norms rather than actual, if the savings are rewarded through a system of matching grants, with the percentage of matching grant going up as the percentage of savings increases, it can act as a great encouragement. The superior or at least an improved performance should be rewarded in terms of increased grants and poor performance or a deterioration in it should lead to cuts. If this strategy is operationalised the institutions will compete in improving quality and efficiency of work to attract increased funds.
The universities could also resort to innovative methods of saving the money by optimum utilisation of space, centralised purchase system, centralised admission and time-table process, development of a network of higher education institutions and sharing of physical and faculty resources. Such an exchange/network would be particularly useful because basic studies and research are weak in most of the universities and it will avoid duplication and multiplication of both physical as well as human resources. The traditional universities can benefit by collaborating with open universities in the field of distance education. Universities should also carry out review of expenditure and see what wasteful expenditure could be reduced. Progressively services, namely hostels, water, electricity and food, may be made self-financing and the cost be recovered from students in full. This will ensure efficient use of services and generate funds to meet the ever-increasing cost of services and supplies.
In order to meet the challenges of the 21st century and to acquire a competitive edge, the higher education system has to transform to make it more socially relevant, information and technology oriented, diversified and of high quality. The skills and specialisation of graduates produced by our system should match the real needs of the productive sectors in the market place and the changing needs of our society. The issues concerning higher education in India revolve around relevance and quality, equity and access on one hand and resource scarcity on the other.
Internal resources
While the government is fully committed to the progressive increase of public spending on university and higher education, it would be imperative to generate additional resources through various measures. The Punnayya Committee (1993) which was set up by the University Grants Commission to look into the funding of institutions of higher education has recommended, inter alia, that as a general rule, a university or college should generate 15 per cent of its annual maintenance expenditure through internally generated resources and this percentage should go up to at least 25 per cent at the end of 10 years. The increase should not be steep or `one time' but may be done on a graded basis every year for the next 5 years. However, there could be exceptions for universities/colleges located in disadvantaged areas. The committee also recommended that the students receiving higher education should bear a reasonable proportion of the cost of higher education. I understand that at present income from students' fee constitutes less than 5 per cent of the total revenue income in Central Universities and Colleges whereas in the State Universities generally it accounts for 15 to 17 per cent. The fees charged from students in Central Universities may be progressively revised so as to reach the level of 15 per cent of the revenue expenditure over a period of 10 years. Any increase beyond this level may, however, be carefully considered as such an increase may have adverse consequences with regard to equity and access to higher education. Perhaps, differential fee may also be charged from students coming from different economic backgrounds. Different fee structure for those subjects/courses which have a high potential of employment may also be considered. In order to avoid deprivation of poor but deserving person to avail of such education, the provision of scholarship, freeship and loan funds may be made. Schemes such as "earn while learning," under which students work in labs, libraries, etc., and earn money, could also be launched. The cross-subsidisation of education will, thus, ensure equitable access to higher education.
Private sector participation
Keeping in view the increasing demand for higher education and inability of the state-funded universities and colleges to cope with the pressure effectively, the participation of private sector should be encouraged. It would at least take care of those segments of the demand for higher education that can afford to pay the prices charged by the private institutions. However, while doing so utmost care must be taken to ensure that the same does not lead to rampant commercialisation of higher education. To this end, necessary control and monitoring mechanism must be developed to ensure quality education at reasonable cost. For many programmes of studies, there is a demand for seats by foreign students who can pay in dollars. The universities may create supernumerary seats up to 20 per cent to enrol foreign students, and students sponsored by NRIs on the basis of full cost fees. Universities should also open their campuses abroad or tie up with universities and institutions to offer their programmes for mobilising funds and providing education in the countries where such education is in demand. Similarly, universities may engage in consultancy services and patents should be taken out for the discoveries and innovations made by the faculty and students. Universities may also rent out their premises during vacations/after class hours on commercial and semi-commercial basis. After meeting the project cost, maintenance and service cost, the balance could be put into the university corpus fund. The UGC may consider a matching grant to the tune of amounts saved in revenue/current expenditure so that the corpus fund of the university is built up over a period of time and the interest earned thereon could be used in the long run for maintenance and development of universities.
Other sources of income will also have to be boosted up by encouraging private donations and endowments, strengthening community participation and establishing industry-university linkages from which both the universities and the industrial sector benefit. The industry should recognise that the skilled qualified manpower it requires can be produced by universities only if the universities are well endowed with finance.
In the preceding paras I have tried to suggest the various ways through which the university finances could be brought back on rails. However, such efforts must not be constructed as a justification for gradual withdrawal of state support to higher education. In fact the government is keen that the budgetary allocation for higher education, both plan and non-plan, is increased substantially. Perhaps the resources raised through disinvestments in public enterprises, as a consequence of economic liberalisation and structural adjustment, can be diverted to infrastructure and human resource development.
K. VENKATASUBRAMANIAN
Member, Planning Commission
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