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Sustainable Education

some policy concepts

by Ashok Khosla

Today’s policy of providing highly subsidised education - to the rich and poor alike is short-
sighted and self defeating. It leads to inefficient use of resources and inequitable delivery
of education to the people of our country. The result is that many deserving people are left
out and the benefits are cornered by the higher income groups and even they get education
that is rapidly deteriorating in quality. The fees charged should be based on operating costs
supported by scholarships for the needy. This will have no financial implications and will, in
fact, save the subsidy being presently given to the rich. These savings can be used for
removing deficiencies in educational facilities.
Private investment in education should be encouraged by removing bottlenecks and
creating an environment for investment. While return on capital investment may not be the
objective and attempts to make illegal gains should be strongly curbed, private educational
trusts should be permitted to generate surpluses for reinvestment in education. Effective
trust laws need to be promulgated to prevent misuse.
The State should be responsible for ensuring access by all to education upto the higher
secondary level at an affordable cost; where necessary, even made free. Subsidies in
higher education, as elsewhere, distort both supply and demand. In the context of the new
economic policy, the entire policy on pricing education needs to be restructured.

Pricing of Education
The basic fee in all educational institutions, government or private, should in no
circumstances be less than the operating cost. This cost can be determined from the
norms for minimum faculty, equipment and infrastructure, making every effort at keeping
the administrative cost at the minimum. An effective fee has to cover these costs. Since
subsidised fees (through scholarships) will be given selectively, the amount allocated for
this purpose will be substantially less than the existing subsidies. The subsidies, both overt
and hidden, presently being given to higher income groups will be saved.

Private Sector Investment

According to popular perception, the private sector largely exploits education for legal and
illegal gains. Capitation fees and short payment of teacher’s salaries in some States are,
indeed, glaring examples of exploitation. However, the responsibility for this state of affairs
is also with the State. These malpractices are simply the result of poor governance and at
times, political and administrative connivance.

Return on Investment
For an activity like education, the social and economic benefits are so high that they alone
can justify the investment of available returns. Thus, no rental or interest income should be
allowed on the initial capital investment made on land, building and equipment. Such
capital investment should be made in the nature of a grant from the promoter, whether
government or a charitable trust.
The return or surplus which can be generated from operations can be classified as (1)
profit, (2) unaccounted gain and (3) surplus for reinvestment in education.
Profit from administration of education in the form of dividends to the promoters, may not
be allowed. Unaccounted gain, namely, kickbacks, capitation fee, short payments, etc are
all illegal activities and need to be handled as such. Systems need to be designed to
effectively deal with them.
Generation of adequate surplus for reinvestment in education will actually constitute the
key growth, better standards and excellence in education. Private educational institutions
should, as a policy, be allowed to generate surplus which should be duly depicted in its
books of accounts, for improvement and expansion of its buildings, furniture, equipment,
library, research, faculty, scholarships. the surplus may even enable them to set up more
institutions in the same or other places. In the context of the new economic policy, the
affluent must pay the full cost for higher education and for the meritorious but economically
weak, scholarships may be made available from within the outlays in the sector. A lean
and efficient educational institutions for higher learning on a self-sustaining basis is the
need of the hour.