By Furqan Qamar

Government-funded higher education institutions in India have served the nation well. For those not so well off in the country to have any hope of higher education, a healthy ecosystem of government-funded institutions needs to continue. Against this imperative, the fact that government and government-aided colleges and universities are in deep financial distress should be cause for grave concern.

State universities and their colleges have been in crisis for some time now. The problem now pervades the central universities. The financial condition of most of them is precarious.

A glance at the income and expenditure accounts shows that expenditure persistently exceeds income for many central universities, including the prominent ones.

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Such deficits have been running into several hundred crores of rupees. In some of the select central universities, the average annual deficit during 2013-14 to 2020-21 has ranged from Rs64.64 crore to Rs 421.35 crore. As a percentage of the total expenditure, their deficits ranged between ~20-33%.

The official explanation is that these are not cash deficits and are caused due to the prior period expenses, and provisions for depreciation and retirement benefits. It is explained that being non-cash or notional, they pose no payment crisis for universities.

A little familiarity with the accounting system and procedure would, however, suggest that operating deficits over a prolonged period adversely affect the survival and sustainability of organisations.

The revenue deficits are transferred to the capital accounts and go on either eating away at the corpus or adding to the liabilities, which will have to be paid sooner than later. Even if they may not pose an immediate threat, they would eventually increase the delay and default risks.

The situation has been caused due to underinvestment in higher education. The per-student grant to the central universities over the past eight years, for example, has recorded a Compound Annual Growth Rate (CAGR) of 2.58%. Discounted for inflation, the grants to the central universities have been declining.

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The situation has been further aggravated due to the discontinuation of the development grants that these universities used to receive under five-year plans.

Such grants are no more available to the central universities. Instead, they must access loans from Higher Education Funding Agency (HEFA) under the scheme of Revitalising Infrastructure and Systems in Education (RISE). Even though the government bears the interest burden and up to 90% of the principal, the borrowing university is required to repay 10% of the principal amount over a period of 10 years. This leads to a repayment obligation in their annual expenditure.

Wary of their inability to meet repayment obligations, only 26 of the 48 central universities have so far accessed HEFA loans totalling Rs 4,142 crore—averaging Rs 159.3 crore per university. The rest have probably given up on infrastructure and equipment upgradation. In contrast, during the 11th and 12th five-year plans, all the central universities, received Rs 7,829.53 crore and Rs 9,346.29 crore, respectively. No wonder the central universities are now reeling under a resource crunch and are crumbling from within and outside. Many have not been able to add new infrastructure. Most have not been able to even maintain their existing facilities and physical infrastructure. Some are even finding it difficult to meet their committed expenses.

Central universities have, thus, been under tremendous pressure to raise resources on their own. They are required to raise user charges and enhance cost recovery to become self-sufficient soon.

Yet, they remain largely dependent on the public exchequer. In six out of the eight select universities, the grant in aid constituted 91-95% of the total revenue.

The per-student academic receipts in these universities range from Rs 6,971 to Rs 38,754 per annum. The per-student expenditure varies from Rs 3.31 lakh to Rs 11.59 lakh per year.

Universities have been quite reluctant about mobilising resources on their own, and not without a reason. Raising fees runs counter to their mission of providing quality higher education at affordable cost. They see higher education as a public responsibility and insist that the government must foot the bill. Some would not want to raise fees for the fear of campus unrest. Besides, there is a built-in disincentive for generating internal revenue; their grants get proportionately reduced by every penny that they generate.

Further, the income tax exemption requires that universities must be wholly or substantially funded by the government. Additionally, they must also not engage in any economic activity which may be considered non-educational.

It is high time that the nation moves towards norm-based funding for higher education. So far, the government as well as the regulatory bodies have avoided this. Even the new National Education Policy has skirted around this critical issue leaving it untouched. It should be no rocket science to work out the per-student grant, subject to a certain minimum for the newly established small-sized universities which could be claimed as entitlements. There could also be a top-up percentage to incentivise universities for their performance on equity, quality and excellence.

The nation must realise how critical public higher education system is for providing quality higher education at an affordable cost to the poorest of the poor.

The author is Professor, Jamia Milia Islamia, and former advisor for education, erstwhile Planning Commission
Views are personal