Recommendations of The Eighth Finance Commission 15.12.1 Though Education- is conventionally treated as a developmental sector, the Eighth Finance Commission considered it as a non-developmental sector which deserved to be upgraded. For the purpose of upgradation, physical norms were followed by that Commission.
15.12.2 The State Governments gave requests to the Eighth Finance Commission aggregating to. nearly Rs.4000 crores for appointment of additional teachers, provision of furniture and equipment, construction of buildings, provision of mid-day meals etc. The then Ministry of Education also emphasized the need for clearing the backlog of pucca buildings for primary and middle schools, conversion of single teacher schools into two-teacher schools, provision, of adequate inspecting staff and administration facilities. The 'Ministry also assessed the financial requirements for this purpose as over Rs.3000 crores. The Eighth Finance Commission disposed of the matter as follows:
"It seems to us that lack of pucca buildings for the primary schools and the existence of single-teacher primary schools constitute two basic weaknesses in the education system. Presently, 1,85,666 primary schools accounting for 40.88 per cent of total number of
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primary schools in all the 22 States are functioning in thatched huts, tents, etc. We- have decided that the States in which the percentage of. primary schools without pucca buildings exceeds 40 per cent, should be helped with upgradation outlays to bring down the percentage of such primary schools to the all-India average, i.e. 40 per cent. We have assumed a unit cost of Rs. 40,000 for a school building of two class-rooms. We have added 30 per cent to the unit cost for the hill States. We have thus allocated Rs. 164.39 crores for the construction of 38,946 additional school buildings in 11 States to bring them to the all-India average of 60 per cent building satisfaction in respect of primary schools.
"Another facet of the-education sector, which caused us concern, was the preponderance of single-teacher primary schools in some States. Out of the 4,54,213 primary schools in the 22 States, 1,65,848 schools function as single-teacher schools. Thus, they form 36.5 per cent of the total number of primary schools. We have decided to extend our support to those States where the proportion of single-teacher schools exceeds 35 per cent, which is the all-India average. The States wherein the proportion of single-teacher primary schools exceeds 35 per cent are Andhra Pradesh, Gujarat, Himachal Pradesh, Jammu & Kashmir, Karnataka, Madhya Pradesh, Mahrashtra, Meghalaya, Orissa, Rajasthan and Tripura. We have provided outlays for the appointment of 45,255 additional teachers to bring these States to the all-India level. In the computation of upgradation outlays, we have adopted State specific emolument-levels for each of the 11 States. We have thus provided Rs.122.01 crores. With this provision, it should be 'possible to raise the number of primary schools with two teachers or more, in the 11 States, to 65 per cent, which is the all-India average. We have provided a total sum of Rs.286.40 crores for upgradation of the education sector."
15.12.3 The upgradation grants were also to be monitored, as per the recommendation of the Eighth Finance Commission. The monitoring mechanisms suggested were State-level and Central level empowered committees of inter-departmental/ inter-ministerial nature, the former headed by chief Secretaries of States and the latter being convened by the Finance Ministry. The Central level Empowered Committee was also given flexibility in terms of transfer of grants from one scheme to another within each sector, alter physical targets depending upon escalation in prices or alterations in physical norms etc. Release of money was designed to be 10% as initial on account advance; 30% after receipt of intimation regarding institutional arrangements; and the balance according to actual physical progress.
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15.12.4 Upgradation assistance provided to the state Government's as per the recommendations of the Eighth- Finance Commission has been confined to four 'Years commencing from 198586, A detailed statement of release of assistance to the State.' Governments, for upgradation in terms of provision of school buildings and teachers may be seen in Table 8 below:
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Table 9
Upgradation assistance for Education based on
recommendations of Eighth Finance Commission
(Rupees in crores) (1985-86 to 1987-88)
1985-86 1986-87 1987-88 Total for
1985-86 to 1987-88
Capital 39.04 10.50 49.14 98.68
Revenue - 1.63 12.84 14.47
Total 39.04 12.13 61.98 113.15 @
Source : Finance Commission Division, Ministry of Finance
@ : includes on account payments.
15.12.5 It may be seen from the above Table that over the three
year period from 1985-86 to 1987-88 the total release of upgradation assistance under both Capital and Revenue account has been only of the order of Rs.119 crores including on account payments. In physical terms the States were helped, during the three year period, to provide over 30,000 teachers and over 3,000 school buildings as may be seen from the Table below:
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Table 10
Number of teachers and buildings provided under upgradation
assistance for Education based on recommendations of the
Eighth Finance Commission
(Units in numbers)
1985-86 1986-87 1987-88 Total for
1985-86 to 1987-88
Teachers - 12800 17433 30233
Buildings - 1870 1302 3172
Source: Finance Commission Division, Ministry of Finance.
15.12.6 As has been brought out earlier, the Eighth Finance Commission had recommended upgradation assistance for putting up school buildings based on an estimate of Rs.40,000 per school building. Subsequently, in the three year period from 1985-86 to 1987-88 there was cost escalation. The Empowered Committee in the Ministry of Finance itself in two spells allowed an escalation of costs for putting up school buildings to the extent of 50% (30% initially in 1985-86 and 20% later in March, 1988). Consequent on this, the number of buildings that could be provided with upgradation assistance over these three years came down from the level. orginally envisaged when the Eighth Finance Commission gave its recommendations.
Recommendations of the Ninth Finance Commission in its first report
(1989-90) and second report (1990-95) 15.12.7 The cost of upgradation of standards of administration so far as it concerns education as per the proposals furnished by the States to the Ninth Finance Commission was of the order of Rs.1723.21 crores. In its first report the Commission indicated that it was making available to the States grants for completion of the task which was 'likely to remain unfulfilled by 1988-89 out of that charted by the Eighth Finance Commission for the five years 1984-89. The Commission found that the physical targets as regards upgradation of capital works having been escalated to the extent of 30% for the three year period 1985-88 and 50% for the year 1988-89. On this basis the Ninth Finance Commission recommended in its. first report a financial provision for the year 1989-90 for upgradation of standards of administration in the area of education to the extent of Rs.41.92 crores. Over and above this the Ninth Finance Commission in its first report also recommended a financial provision of Rs.200 crores for equalisation of social and community services for elementary education specifically considering that 'provision of school buildings under Operation Black Board from the NREP and RLEGP sources to be inadequate.
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15.12.8 In its second report (for 1990-95) the Ninth Finance Commission has followed the normative approach according to which needs and capacities of different governments are assessed normatively and such normative assessments are taken as the basis far determining the volume and pattern of federal transfers. So for as education is concerned the factors that have been taken into consideration for the purpose of assessing expenditure are the following:
Primary Education - Expenditure per child in the age group of 6- 10 (taken as a dependent variable).
- Proportion of enrolment in primary stage to the population in the age group 6-10.
- Student-teacher ratio in primary stage.
- Differences in the average salaries of primary school teachers across the States.
- Price difference across the States.
Secondary Education - The expenditure on secondary education per child in the age group of 11-18 (taken as a dependent variable).
- Enrolment in secondary stage as a proportion of children in the age group of 11-18.
- Proportion of private unaided secondary schools to total number of schools.
- Salary differences of trained graduate teachers in the States.
- Student-teacher ratio in the States.
Higher Education - Per capita expenditure on higher education.
- Proportion of enrolment in higher stages of education to total population.
- Student-teacher ratio.
- Difference in price levels amongst States.
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- Population density and proportion of enrolment in private college to total enrolment.
15.12.9 Based on the above parameters, econometric formulae have been worked out, normative expenditures assessed with reference to them and built into the overall requirements of the States. Upgradation grants as per previous practices have not been specifically recommended.
15.12.10 The direct consequence of this is that allocation for Education from out of the grants-in-aid recommended by the Finance Commission would be dependent on the priority for Education assigned by the respective States. States may or may not assign adequate priority. If adequate priority is not assigned, from the point of view of Education there would be retrogression from the earlier practice of allowing specific upgradation grants tied to Education. In fact, Shri Justice A.S.Qureshi, Member of the Ninth Finance Commission, in his dissenting note, has made the following valid observations:
"In our first Report, we had given the upgradation grants for improvement of certain beneficial services. We had also given grants for the special problems of the States. Those grants were separate and identifiable. The advantage of such grants is that they could be tied grants for specific purposes. It was possible to insist upon the performance relatable to the grants from the concerned States. In the present Report,, we have departed from that practice and instead of giving upgradation grants or special problem grants they have been built in the requirements of the States in this regard which is assessed on normative basis by the use of econometric models and algebric formulae. In my opinion, this is not correct. We should have followed the same method as we followed in our first Report and should have recommended grants for special problems and upgradation of services, so as to make abundantly clear how much is given, for what purpose and to ascertain the compliance of the objectives of the grants."
Strategies for raising resources 15.13.1 As brought out elsewhere (Table 6) intra-sectorally, allocations have shown a marked preference for Higher Education in spite of low rate of literacy, though over the sixth and seventh plans, a comparatively lesser priority has been shown for Higher Education. Primary Education is yet to reach the level attained during the first plan. This pattern is not consistent with the Constitutional mandate for achieving universalisation of Elementary Education. Nor is it consistent with the need for providing a meaningful vocational bias for School Education. Continued high levels of investment in Higher Education is contradictory to the results of studies on returns from
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investment in Education which have brought out that lower levels of education have a higher average rate of return. Research findings are also to the effect that investment in lower levels of education contributes more to income distribution and reduction of poverty, besides to economic growth.
15.13.2 It is in the above background of ever increasing involvement of the Government in educational financing and distortions in terms of intra-sectoral priorities that mobilisation of resources and their deployment should be considered.
15.13.3 Public expenditure on Educatin as a proportion of GNP, over the years, has been as indicated in the Table below which shows that while it has increased, as of 1986-87, it fell far short of 6%.
Table 11
Share of Education in GNP (%)
1950-51 1.2
1960-61 2.5
1970-71 3.1
1984-85* 3.7
1985-86** 4.0
1986-87@ 3.9
* Budget expenditure (actual).
** Budget expenditure (Revised Estimates).
@ Budget expenditure (Budget Estimates).
15.13.4 The Central Statistical Organisation has recently released the quick estimates of National Income (GNP) for the year 1988-89 which has been placed at Rs.3,06,822 crores at current prices on the basis of which the plan and non-plan budget of Education Departments at the Centre and the States as a percentage of national income comes to 4.2% for the year 1989-90.
15.13.5 India ranks 115th in the world in terms of investment in Education as a percentage of GNP. Amongst the countries with a population of 10 crores above, India is at the very bottom, barring Bangladesh. That India's educational expenditure as a proportion of GNP compares very unfavourably vis-a-vis world-wide expenditure on Education is brought out by the following Table:-
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Table 12
Expenditure on Education as % of GNP
Country Groups 1982
Africa 4.9 Developed Nations 6.2
America 6.4 Developing Nations 4.3
Asia 5.1
Europe (incl USSR) 5.6
Oceania 5.8
Recommendations i) The first step, therefore, should be to provide for at least 6% of the GNP for Education which has not so far been provided, though this has been repeatedly urged for over quarter of a century. (The figure of 6% of GNP was suggested by the Education Commission 1964-66 on the basis that, that was the level of investment which had already been reached even by certain developing countries of Asia. An estimate of investment required for implementing the recommendations of the report of Education Commission 1964-66 was made. Coincidentally, it was noted that this amount approximated to 6% of GNP. It had also been noted that the economic growth rate per annum for 20 years since then was envisaged at 6%. A quarter of a century has since passed by considerable changes have come about in the economy. Therefore, in the changed context, there is need for reviewing the proportion of GNP that should go into Education as on date). Even providing 6% of GNP means substantially larger allocations for Education in the budgets of the Central and State Governments. (In this context, the following table which speaks for itself may be seen).
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Table 13
Share of Education in
Five Year Plan Outlays/Expenditures (%)
Plans Share of Education in Total
Plan Outlays/Expenditure (%)
First Five Year Plan 7.86
Second Five Year Plan 5.83
Third Five Year Plan 6.87
Annual Five Year Plan 4.86
Fourth Five Year Plan 5.04
Fifth Five Year Plan 3.27
Sixth Five Year Plan 2.70
Seventh Five Year Plan 3.55
ii) All technical and Professional education should be made self- financing, education being viewed as involving the use of resources (inputs) that should be necessarily paid for by the beneficiaries as it confers on them greater employability (output).
Other than public funding, the alternative methods of funding Higher Education are:-
i) Graduate taxes
ii) Increase in fees and
iii) Student loans
Graduate taxes, if any, are to be imposed upon the beneficiaries i.e., the users of services of graduates, namely, employers. However, the employers are likely to resist imposition of such taxes on grounds of economic viability of their own operations getting adversely affected. This is also likely to result in discouragement of employment of the qualified.
The tuition fees now prevalent in educational institutions, by and large, are those fixed many years ago. In 1950-51, income from fees accounted for 20% of the total expenditure on education. This proportion has now come down to 5%. The following table brings out the picture regarding low levels of fees charged in the University System.
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Table 14
Type of Higher Nature of Fee charged per annum
Education courses
Institution
Central Under-graduate Between Rs.120/- in Banaras
Universities level general Hindu University and Vishwa
courses Bharati and Rs.180 in Delhi
University.
Central Post-graduate Between Rs.144/- in Vishwa
Universities level general Bharati and Rs.300/- to Rs.400/
courses in the North Eastern Hill
University.
Central Professional Between Rs.120/- in Vishwa
Universities courses like Bharati and Rs.1,440/- in
B.Ed., LL.B etc. Delhi University.
State Under-graduate Between Rs.40/- to Rs.180/-
Universities level general in Rajasthan University and
courses. Rs.400/- in Gujarat, Bombay &
Nagpur Universities.
State Post-graduate Between Rs.100/- to Rs.200/-
Universities level general in Rajasthan University and
courses. Rs.500/- to Rs.600/- in
Bombay University.
State Under-graduate Between Rs.100/- to Rs.200/-
Universities professional in Rajasthan University and
courses like Rs.500/- in Bombay
B.Ed., LL.B etc. University.
State Engineering An average of Rs.533/-
Universities courses.