 APPENDIX `O'
MEMORANDUM ON ITEM 17 :
SETTING UP OF AN EDUCATIONAL
 DEVELOPMENT CORPORATION

In connection with the formulation of the Fourth Plan, it has been suggested, inter alia, that an Educational Development Corpo- ration should be set up which may administer the provident fund of teachers, implement the Triple Benefit Scheme, utilise assistance which may be available, and assist in raising finances for meeting capital expenditure for school buildings etc. A note giving details of the proposal prepared by Shri S. Natarajan, Director of Projects, SITU Council of Educational Research may be seen at Annexure XXIII.

2. Copies of the note were forwarded to State Governments for eliciting their views. Only two State Governments (Rajasthan and West Bengal) have communicated their views. Copies of these may be seen at Annexure XXIV. The Governments of Assam, Madras and Uttar Pradesh have stated that they are examining the matter. It is understood that the Maharashtra Government have already initiated an arrangement for giving loans for capital expenditure from the accumulated provident fund collections of teachers. The Maharashtra Government are being requested to give. a detailed note on the working of the scheme.

3.The matter is placed before the Board for its consideration and recommendation.

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ANNEXURE XXIII

Education Development Corporation for Administering Triple benefit scheme and financing Education.

The Mudaliar Commission Report on Secondary Education has recommended the adoption of a Triple Benefit Scheme for teachers in all schools. The Scheme envisages a life insurance if death of a teacher takes place while in service; a provident fund or gratuity being a lump sum to be paid to a teacher on his reaching an age of superannuation; and a pension for his life. The Madras State is the first to institute a scheme on these lines. The features of the Madras scheme are :

(1) every teacher should insure his or her life for an amount not lower than the minimum fixed by the State Government for each category of teachers in elementary and secondary schools ;

(2) a provident fund scheme where the teacher contributes 6 1/4% of his salary every month. The management and the Government contributing an equal amount;

(3) a pension ranging from Rs. 20 to about Rs. 70 (not exceeding 25% of the average salary of the teacher). On the teacher fulfilling certain conditions regarding age of retirement and number of years of service, the teachers are allowed to utilize the provident fund contribution for paying the premium on the insurance policy. Some of the other South Indian States are reported to have decided upon introducing a pension scheme while all States have accepted the Triple Benefit Scheme in principle. Perhaps, what frightens them is an estimate of the great cost involved.

All teachers in aided and local body schools in all States and Union Territories are subscribing to the Provident Fund Scheme. Teachers in Government schools have a Pension Scheme as all other Government employees have. They also subscribe for a provident fund which is non-contributory.

The contributory provident fund applicable to teachers in non- Government schools is usually deposited in the Post Office Savings Bank account in the name of the individual teacher and carries the usual Post Office rate of interest of 2 to 2 1/2. Permission has been accorded to teachers to make periodical withdrawal from the Savings Bank account to be invested in Post Office Cash Certificates with the approval and sanction of the controlling authority. Not many teachers seem to take advantage of this provision because of the rather cumbrous procedure involved. Hence, the teachers get only the low rate of interest allowed by the Post Office and this effectively reduces the benefit which the teachers would otherwise get.

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Local authorities, however, merge the provident fund contribu- tions of their employees in their general funds and allow the deposits an interest of 4 or 4 1/2%. Government also allows, 4 1/2% interest to the provident fund deposits of its own employees. It may also be mentioned here that in the employees provident fund scheme applicable to all workers in factories and industrial establishments an Interest of 42 1/2% is guaranteed. It is only teachers in aided schools that get the lower rate of interest. It is, therefore, suggested that the rate of interest and provident fund for teachers under all managements be uniformily fixed at 4 1/2%. The authorities of the Post Office seem to feel that they could not make any differential treatment in regard to the deposits relating to the provident fund accounts of teachers in aided schools.

It is, therefore, suggested that the present practice of having provident fund deposits of teachers in aided schools be taken away from the postal department and that a separate Provident Fund Ad- ministration Unit or an Education Development Corporation be set up in each State which can handle the provident funds deposits of all the teachers under all managements. If the deposits could be assured an interest of 42 1/2% then it will be seen that on an annual deposit of Rs. 75 by a teacher at the rate of 6 1/4% on his monthly salary of Rs. 100 he would have contributed in 30 years Rs. 2,250. Corresponding contribution from the management and the Government would be another Rs. 2,250. Total Rs. 4500. This amount at the end of 30 years at 4 1/2% interest would total upto Rs. 12,000. This may enable the administration to provide a lump sum payment inclusive of health and accident equivalent to 24 or 36 months' salary, a gratuity equivalent to 60 months' salary and life pension of half his average monthly salary. The trend everywhere is for increasing the savings. The factory workers are now required to contribute 8% and a similar permission is given to other employees. If the teachers are required to contribute 8-2/3%, then the amount of benefit which the teacher will be getting could be increased. These figures may be examined actuarialy and decided upon.

It may, however, be asked whether it would be a feasible pro- position to provide a 4 1/2% rate of interest. When all other provident funds are getting that there is no reason why teachers should be denied this. However, this problem can be looked in the context of the programme of educational development in the country.

Expansion of education and improvement of educational facilities require large sums of money and all development programmes are held up because the Government is unable to provide the necessary funds. Expenditure on capital items like building and equipment could not be met adequately from current revenues and if the Government is to keep pace with the rate of progress that it is stimulating and that is necessary for the development of the country then other sources should be found for meeting this heavy capital expenditure. It may be necessary to create a fund for the purpose of financing educational development. It is suggested that the provident fund of teachers now in the post office could be used as such a fund and its administration may be entrusted to an Educational Development Corporation to be set up by the Government. The capital of this Corporation may be 51% Government and 49%

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teachers where every teacher takes a share of a nominal value of Re. 1. The accumulated provident fund of teachers from the Post Office Savings Bank and in other accounts could be transferred to this Corporation for administration. The Corporation may also be authorised to make the monthly collection on provident fund deposits. The Corporation may be empowered to issue school bonds or debentures of moderate denomination of Rs. 50, 100, 250, 500 and 1,000. This Corporation may advance money to educational institutions and to the authorities controlling them for the purposes of development and improvement and these loans could be on a long term basis repayable in 40 years at the rate of 6% per annum. As there are a large number of institutions, elementary and secondary and as all these institutions are controlled by the State Government through the grant of finncial assistance for maintenance, the loans will be secured and the repayment will be guaranteed. This will make available to all administration in charge of education immediately a very sizeable sum for embarking upon their development programmes in respect of capital expenditure and also provide them every year a sizeable sum for continuing this developmental work. This will certainly bring the Corporation an interest yield of 6% out of which they can pay the teachers 4 1/2% interest on their provident fund and the margin of 1 1/2% would be more than sufficient to cover administrative expenses.

In this connection it should be noted that many non-Government institutions depend, to a large extent, on public charity and philanthropy for capital expenditure in regard to buildings and equipment. This is not always readily available nor is it very generous and in the years to come it may decrease considerably. However, among the citizens there is a growing desire to help the cause of education and this desire can be capitalized by the issue of school bonds of moderate denominations which would enable the middle class people to contribute. The contribution will not be donation but it will be a loan adequately secured and with a guaranteed rate of interest. This would be a means of stimulating, to a considerable extent, public support to education.

ANNEXURE XXIV

Educational Development Corporation-views of the State Governments

RAJASTHAN

The bulk of the Primary School Teachers in Rajasthan are either :

(1) Government employees, or

(2) Panchayat Samiti employees.

A very negligible proportion alone relates to employees of private schools (there are no Municipal Schools in Rajasthan). The Government employees have the benefits of pension, compulsory insurance and optional provident fund. In respect of the employees th Government is not in favour of introducing compulsory provident fund since they may not be able to bear the burden.

The Panchayat Samiti Teachers also have similar benefits. How- ever, the Government of India had recently held that the State Gov- ernment Rules requiring compulsory insurance with the State Insurance Department is ultra vires since the State Insurance Department cannot insure Panchayat Samiti employees. It has been decided to introduce compulsory non-contributory provident fund but allow exemption to the extent that premium is being paid on an old State Insurance policy or a new Life Insurance Corporation Policy. The Government are of the opinion that no further benefit is possible in respect of these two categories of employees.

As regards employees of private schools there is in existence al- ready a compulsory provident fund scheme. The institutions' con- tribution is 6 1/4% on the Teachers' Day and since this is one of the admissible items of expenditure the institution gets proportionate grant-in-aid from the Government also. The Teachers' share is also 6 1/4% of their pay. The Government is not in favour of extending pensionary benefits to these employees for the simple fact that there is no regular organised system of registration or certification of Teachers of private schools. These Teachers usually change their em- ployers, frequently finding their way into government service. It will be difficult to properly administer the pension scheme for such employees. A committee of the government is going into the general question of instituting a provident fund for all private employees not only of the Educational Department but of other Departments as well.

WEST BENGAL

A Development Corporation is generally justified when long term loans are to be extended to concerns requiring large initial expenditure but likely to earn good profits in the future. The in- terest charges and amortisation instalments are paid out of the pro- fits earned. It will be undesirable to extend this principle and pro- cedure to the financing of educational development. Most of the

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borrowing institutions will not be able to earn enough surpluses to be able to service the loans. If the debts are to be serviced out of maintenance grants received from government, the ultimate respon- sibility for the loans will fall on government. And if government will not meet the debt charges, the Development Corporation is likely to be saddled with unrealisable loans on the one hand and with substantial liabilities to the depositors on the other. Government will then have to come to the rescue.