Friday, November 27, 2015

Economics of Education

Volume XIII Part 4 November 25, 2015 Business Advisor

Economics of Education

B. Yerram Raju

National Education Policy is scheduled for release shortly. The fears of FDI in education are looming large. Already the privatization of education during the last two decades has eroded the values and loaded the backs of children with loads of books. Lower middle class bemoan that qualitative education is unaffordable.

Several private schools even at kindergarten charge a lakh of rupees for admitting a child. The non-public ‘public schools’ charge the fees much above. At the high school and college levels per candidate fees is touching the roof. And there is no guarantee for quality delivery of inputs. Most have teachers less than deserving qualifications.

Government schools and colleges have poor infrastructure and poorer delivery mechanisms. Had all the civil servants, elected representatives chosen to send their wards to the government schools, their plight would be not what they are: with no toilets, no power, no play grounds, and in several of them even no teachers!! Yet, the threat of transfer or other punishments to teachers make them adopt unholy means to assure pass for all their wards.

IIMs and IITs charge fees approved by their Boards for management education, technology and engineering courses. But those who reach these portals through competitive entrance tests have the hope of post degree promise of a job. Several others are listing for the same entrance in the not so descript colleges also demand no less fees: Rs. 3lakhs to Rs.8lakhs per course per candidate.

Medical seats go for no less than a crore of rupees. With such high cost of education the seeds of corruption are sown at the beginning of their careers. These students have to earn the money spent on education and normal salaries paid by the government would not be adequate to compensate their parents. On top of this, the craze for western degree with a reasonable assurance of job continues.

With no teachers and with no laboratories even universities have been started at the rate of one per district. Several of them do not have vice chancellors. Government of Telangana noticed during their enquiry in July 2014 that many of the management and engineering colleges looted the government through the fees reimbursement, which they promptly stopped. 

The following table reveals the way the fees reimbursement took place in the past:
                                                                                                            Amount in Rupees
Nature of the Course
Graduate courses in natural and social sciences
Engineering & Technology graduates
MBA and BE

The table indicates that the government must have had a back of the envelop calculation that the courses require this much expenditure per student that qualified reimbursement. If there are 1000 students with the life of the infrastructure at 50 years, the recovery cost of infrastructure based on discounted cash flow method, annual maintenance costs, costs of library, laboratories, play grounds – indoor and outdoor, rising costs of teachers and administration, social welfare measures etc., what would be the amount of fees that could be charged? Obviously, the infrastructure DCF makes a difference and therefore the fees cannot be uniform throughout the State. It has to vary between rural, urban, and metro areas with no compromise on quality of education imparted. At what intervals such fees should be reviewed? It is time to regulate the fees on such considerations.

While the administrative staff can be having reservations, teachers shall be appointed only on merit if the country would like to have a strong knowledge base.

All these give rise to a few fundamental questions: how are these levels of institutions right from primary school to University, technical to medical institutions charging their fees? Has the Government ever attempted to calculate the cost of education in this country? I tried to search for the answers only to be disappointed.

Can we achieve universal education enshrined in the Right to Education Act through such high cost structures? Does the vision of the National Education Policy offer a solution on this score?

The Government website: has little focus: it “would like to bring out a national education policy to meet the changing dynamics of the population’s requirement, with regard to quality education, innovation and research, aiming to make India a knowledge superpower by equipping its students with the necessary skills and knowledge and to eliminate shortage of manpower in science, technology, academics and industry”.

It will also evaluate public-private partnerships (PPPs) to finance education, seek ways of enhancing India’s spend on higher education to 1.5% of GDP from less than 1% now, and emphasize on research and development (R&D). We succeeded in Navodaya schools but failed in Sarva Siksha Abhiyan. A new name is not going to deliver as much as a change in the mindset of the bureaucracy.

Up to the high school level, education shall be the responsibility of the government like in several developed countries, like Canada for instance that has state of art schools at a distance of 5km radius from the homes. There are no reservations for any class of citizens. The Prime Minister’s child and his messenger’s child study in the same school and sit side by side.

No student is expected to buy books meant to cover the curriculum. Parents have to bear the expenditure relating to notebooks, minimum stationery like the compass box, calculator, drawing book, play books etc.

Can our National Education Policy hope to usher in this change within a five year time frame? Second, will our government commission the cost of schooling at various levels and rationalize the fees structure to mandate the institutions to collect that much and no more with provision to review once in every two years? There must be regulatory mechanism for overseeing the fee structure in educational institutions. Hopefully, a country that has pinned its hopes on the rising youth for being a global driver for growth would engineer these right processes.