SUPPLEMENTAL NOTES : GRANT-IN-AID FORM STATE GOVERNMENTS TO LOCAL AUTHORITIES-- URBAN AND RURAL : CENTRE-STATE RELATIONSHIP IN FINANCIAL SUPPORT TO EDUATION
SI.01 We have recommended that the administration of school education in a district should be transferred to District School Boards and that in areas of bigger municipalities to Municipal School Boards.248 We have further suggested that even smaller municipalities should be associated with the administration of education within their areas and be made to bear a certain portion of the expenditure thereon. in this note, we shall make a few suggestions regarding the manner in which grant-in-aid to these authorities, for educational purposes, shall be used to stimulate local contributions and thereby get larger revenues for education. incidentally, we shall also discuss briefly the Centre-State relationship in the financing of education.
SI.02 Grants-in-Aid to District School Boards. The Zila Parishads have an authority to levy a cess on land revenue for purposes of education. in this context, we recommend that the State should prescribe the minimum cess to be levied by a Zila Parishad and also authorize it to raise the same voluntarily up to a prescribed maximum. In order to stimulate the use of this authority, a grant-in- aid proportionate to the additional revenues thus raised should be guaranteed. A device of this type has been adopted in Maharashtra State and it is found that most of the Zila Parishads have raised the cess substantially. It is possible that a similar result may be obtained elsewhere also.
SI.03 The existing system of grant-in-aid to local authorities needs revision. An analysis of the existing practices on the subject shows considerable variation. In some States, the grants are given on a deficit basis, and it is the general experience that, under this system, the politically important and vocal districts, rather than the needy or backward areas, get the most benefit and there is no incentive to economize. When 'proportional' grants are given as a percentage of the total expenditure, the richer districts tend to get larger grants; and innumerable problems arise regarding the 'approved' or 'admissible' expenditure. The 'block' grants tend to be inelastic and particularly unsuitable in a
248 Chapter XVIII.
901
902 EDUCATION AND NATIONAL DEVELOPMENT SI.04
situation when expenditure in education is rising fast. On an overall view of the existing practices, therefore, we suggest that a reform of the grant-in-aid procedures in respect of Zila Parishads be carried out on the broad outlines indicated below:
(1) The grant-in-aid for the salaries and allowances of teachers and other administrative and supervisory staff sanctioned by Government should be on a 100 per cent basis; some definite rules should be prescribed regarding the basis on which the number of teachers required should be calculated (e.g., on the basis of enrolment). The administrative and supervisory staff could be related to the number of teachers.
(2) For the non-teacher costs, a block grant per child in attendance should be given. The amount of this grant should be fixed separately for each category of schools and should be revised every three to five years.
(3) The resources raised locally by the Zila Parishad, as well as the State grant thereon, should be left with the Zila Parishad for such developmental programmes as it deems necessary.
(4) Grants-in-aid for non-recurring expenditure should be given separately, preferably at about two-thirds of the expenditure.
The major objective of the system of grant-in-aid to Zila Parishads should be to equalize educational opportunities. This should be kept in view while sanctioning the posts of teachers or deciding the recurring grant-in-aid per pupil or the proportion of the non-recurring grant to be given. Moreover, the amounts of grant-in- aid should be allowed to be funded and not made to lapse at the end of the financial year, as this encourages economy and a careful use of resources.
SI.04 Grant-in-Aid to Municipalities. From the quantitative point of view, the municipal funds are even more important than the contributions of the Zila Parishads because they are growing rapidly on account of industrialization, urbanization, and the 'increasing concentration of wealth in urban areas. In the erstwhile British Indian Provinces, the municipalities were made to pay for the support of primary education as early as in 1882. A tradition has thus grown up and we now find municipalities like Bombay spending a few million a year on primary education. On the other hand, in the erstwhile princely States, the municipalities were not entrusted with primary education nor paid for it. Thus, even the big municipalities like Hyderabad, Bangalore or Gwalior make no contribution in support of primary education. There is no reason why the richer urban areas should be exempted from responsibility for education. We recommend that all municipalities should be compelled to pay for a portion of the cost of education in their areas
SI.07 GRANT-IN-AID 903
by the levy of a cess on land and buildings. Even a minimum cess of two per cent of the annual letting value of real property in urban areas can secure a fair and increasing contribution to the support of
education.
SI.05 In devising a system of grants to municipalities for school education, it is essential to remember that the municipalities show an immense variation in their wealth and capacity to support education. For instance, a small municipality in a semi-rural township of 5 to 15 thousand population has a very limited capacity to raise funds in support of education compared with a big corporation like that of Bombay. It is, therefore, necessary to devise a system of grant-in- aid which will vary from one group of municipalities to another; and in our opinion, the best procedure would be to adopt a method under which the municipalities could be classified on the basis of their wealth and the poorer municipalities given a higher rate of grant-in- aid than the richer ones. This principle was enunciated, as early as in 1937, by the Kale Committee of the then Bombay State, and a good deal of experience in its implementation has been gained in the States of Gujarat and Maharashtra. This could be of considerable use to other areas adopting the programmes. 249
SI.06 The cases of the larger corporations like Bombay, Madras, Calcutta or Delhi, which form the wealthiest group among the municipalities, would have to be considered separately. At present, the position shows great variation. For the Bombay Corporation, the State Government gives a block grant which now stands at Rs. 6.8 million in a total educational expenditure of Rs. 54 million. In Calcutta, the corporation spends about Rs. 3.8 million and gets no grant-in-aid. In Madras, an identical grant-in-aid formula applies to all municipalities, from the smallest to the biggest. At present, the Government grant to the Madras Corporation is equal to Rs. 4.1 million in a total expenditure of Rs. 13.4 million. Several big corporations like Hyderabad have no financial responsibility at all in education. It would be desirable to make all corporations responsible at least for primary education and give them grant-in-aid on a proportional basis, i.e. at a certain percentage to be fixed for a corporation depending upon its resources. The same principle would apply to other large municipalities which have a School Board, the only difference being that the grant-in-aid would be generally at a higher percentage than that in regard to corporations.
SI.07 The smaller municipalities will be able to contribute even less. By and large, they should be made responsible for all non- teacher costs (the, teacher costs being borne fully by the State Governments) and should be required to meet them by the levy of a local cess on lands and
249 A similar recommendation was made by the Committee of Ministers constituted by the Central Council of Local Self-Government, 1963.
904 EDUCATION AND NATIONAL DEVELOPMENT SI.08
buildings in their areas and a suitable grant-in-aid towards it given by the State Government, on an equalization basis.
SI.08 Equalization. We have recommended grants-in-aid from the State Government to the Zila Parishads and the municipalities on the basis of equalization. It is necessary to explain this new concept of grant-in-aid which has been in successful operation in the USA for a number of years. The central concept of equalization is that, for a given local effort, the local authority must be able to reach a given level of expenditure per child. For instance, in the case of two municipalities-A and B--let us assume that
- the level of equalization in primary education has been fixed at a recurring expenditure of Rs. 50 per child per year;
- it has also been decided that each municipality should contribute, to the expenditure on primary education, at the rate of two per cent of the annual letting value of real property within its area; and
- this rate produces an income of Rs. 10 per child in municipality A and Rs. 20 per child in municipality B.
Under these circumstances, the grant-in-aid of the State Government to municipality A would be Rs. 40 per child and to municipality B, Rs. 30 per child.
SI.09 The Role of the Central Government in the Financing of Education. It has been stated above that the contribution of 'Government funds' to total educational expenditure may have to be increased from the present level of 71 per cent to about 90 per cent.250 This is the contribution of the Central and State Governments taken together. For a clarification of the position, however, it is necessary to discuss the contribution of the Central Government separately. The State Governments have the residual responsibility to finance education, i.e. they must find all the funds required for education after allowance is made for contributions by the Central Government, the local authorities and other sources.
SI.10 The Government of India gave special grants to the Provinces for educational purposes from 1870 (when authority over education was first decentralized to them) to about 1921. These were particularly large between 1902 and 1914 which was a period of comparative boom in the Central revenues. They were, however, discontinued in 1921 when education was transferred to Indian control in the Provinces. One of the outstanding events of the post- Independence period is the
250 We expect that the balance of 10 per cent would be made by fees (3 p.c.), contribution of local authorities (4 p.c.) and voluntary contributions and donations from the people (3 p.c.).
SI.13 GRANT-IN-AID 905
resumption of assistance by Central Government for education and these have continuously increased during the first three plans. In addition, the Central Government has been incurring considerable direct expenditure on education. These two forms of Central financial support to education will have to be considered separately.
SI.11 Direct Central Expenditure on Education. Table SI.1 shows the growth of direct Central expenditure on education from 1950-51 to 1960-61, the latest period for which statistics of expenditure are available.
It will be seen that the total educational expenditure from the funds of the Central Government has increased from Rs. 35 million in 1950-51 to Rs. 296 million in 1960-61 which implies an average annual increase of 23.7 per cent which is considerably greater than that in the total educational expenditure which increased at an average annual rate of 11.7 per cent only. It will be seen further that the bulk of the Central expenditure on education is incurred on higher education and on buildings and scholarships which are also mostly meant for higher education only. This is in keeping with the constitutional responsibility of the Government of India to coordinate and maintain standards in higher education.
SI.12 In the Third Plan, Central expenditure on education increased still further at about 18 per cent per year as shown in Table SI.2. Its detailed distribution over different sectors is not available.
SI.13 In the days ahead, the Centre will have to assume a still larger financial responsibility for education through the expansion of the Central sectors. Our proposals on this subject have been detailed in the appropriate context in the earlier chapters of this Report. By way of reference, we give below some of the programmes which we have recommended for inclusion in the Central sector.
(1) Expansion of the programme of national scholarships;
(2) Expansion of the programmes of scholarships for the backward classes;
(3) Larger allocations to the UGC for - development of Centres of Advanced Study and major universities ;
- developing Schools of Education in a few selected universities;
- developing postgraduate education and research;
- provision of maintenance grants to State universities;
- establishment of the Central Testing Organization; and
-development of literature in modern Indian languages.
(4) Development of agricultural, engineering and medical education.
(5) Promotion of educational research.
906 EDUCATION AND NATIONAL DEVELOPMENT
TABLE SI.1. EDUCATIONAL EXPENDITURE THROUGH CENTRAL GOVERNMENT
FUNDS BY OBJECTS (1950-51 to 1960-61)
Expenditure on education through Central
Government Funds
Type of institution/object
Percentage of expen-
Amount diture on the
(Rs. in 000's) object to total
expenditure from
Central Govt.
Funds
1950-51 1960-61 1950-51 1960-61
Rs. Rs.
Direct Expenditure ..
Pre-primary Schools .. 187 .. 0.1
Lower Primary Schools 468 17,943 1.3 6.1
Higher Primary Schools 308 11,914 0.9 4.0
Secondary Schools 2,229 6,412 6.3 2.2
Schools for Teacher Training .. 1,778 .. 0.6
Schools for Vocational
Education (excluding Teacher
Training) 1,720 9,241 4.9 3.1
Schools for Special
Education 104 1,087 0.3 0.4
Universities and Institutions
for Higher Education 11,591 58,962 32.9 19.9
Colleges for Teacher
Training 136 1,100 0.4 0.4
Colleges for Professional
Education (excluding
Teacher Training) 7,928 30,255 22.5 10.2
Colleges for Special
Education 127 1,378 0.4 0.5
Total (Direct
Expenditure) 24,611 140,259 69.8 47.4
Indirect Expenditure
Direction and Inspection ... 673 .. 0.2
Buildings 8,278 111,447 23.5 37.7
Scholarships and other
financial concessions 1,769 32,478 5.0 11.0
Hostel charges 158 1,106 0.4 0.4
Miscellaneous 431 9,815 1.2 3.3
Total (Indirect
Expenditure) 10,636 155,519 30.2 52.6
GRAND TOTAL 35,247 295,778 100.0 100.0
N.B. Totals do not tally due to rounding.
Source. Form A of the Ministry of Education, Government of India.
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TABLE SI.2. BUDGETED CENTRAL EXPENDITURE ON EDUCATION IN THE THIRD
PLAN
Budgeted expenditure of the Govern-
Year ment of India (excluding grants to
States)
(Rs. in 000's)
1961-62 333,428
1962-63 459,636
1963-64 428,794
1964-65 617,938
1965-66 756,194