The Centre’s big boost to education spending, which relies on a 1% hike in cess on taxpaying citizens and companies, already has universities, schools and advocates scrambling to accomodate what they expect will be an explosive demand for education.
Finance minister P. Chidambaram announced an increase in the education cess from 2% to 3%, first reported by Mint last week. A person earning an annual taxable income of Rs7 lakh, for example, pays Rs3,200 as cess every year. He can now expect to pay Rs4,770 starting on April 1.
“When the cess was 2%, the mop-up on that account was Rs10,671 crore so an additional 1% cess is expected to garner around Rs5,000 crore,” Chidambaram said.
The additional revenue will be applied to fund secondary education and an expansion that all publicly funded universities must make to admit students of other backward classes. Thus, the plan to build more classrooms, hire more teachers and expand courses has already begun. IIT-Chennai, which will increase seats from 5,000 to 9,000 by 2014, expects to outgrow its campus. Still, director M.S. Ananth has a greater worry. “Finding land will not be a problem. The main problem is getting faculty at such short notice,” he said.
India’s private sector largely criticized the cess increase, although business leaders did welcome reforms in a sector that has long been attacked for not adequately preparing graduates. In a press release, Rajeev Chaba, president and MD, General Motors India, said: “Imposition of additional education cess is a step backward.” First levied in 2004, the 2% surcharge has been used to fund an elementary education programme, Sarva Shiksha Abhiyaan, and midday meals for schools. Much of the money collected for SSA went largely unspent until November of last year. In his Budget, which increased overall funding to education by 34%, Chidambaram increased funding for schoollevel initiatives by more than a third as well, to Rs23,142 crore for the next fiscal year. He added a Rs750 crore scholarship programme intended to prevent class VIII students from dropping out of school by paying them Rs6,000 per year to stay. Education activists welcomed the increase in funds, but said that high drop-out ratios cannnot be changed by scholarships.
“The high dropout rate of students from school is due to the fact that the government of India has not got a scheme like universal education at the secondary level. A few scholarships are unlikely to remedy the situation,” said Madhav Chavan, director of Pratham, a Mumbai-based organisation which focuses on rural education.
The finance minister also announced an additional Rs50 crore to fund vocational education. He also pledged Rs750 crore to upgrade 300 Industrial Training Institutes, trade education facilities, across India through public-private partnerships.
(Jeetha d’Silva in Mumbai and Monica Gupta contributed to this story)