Saturday, February 24, 2007


MoF against cess hike to fund higher education

MoF against cess hike to fund higher education

NEW DELHI: The possibilities of a 1% cess on higher education appears to be losing support as the finance ministry is more in favour of using revenue buoyancy to meet additional demand.

Sources say the allocation for higher education in the forthcoming Budget is expected to be in the region of over Rs 6,500 crore. Of this, nearly 50% is expected to be allocated for the expansion of Indian Institutes of Technology (IIT), National Institutes of Technology (NIT), Indian Institutes of Management (IIM), central universities and IT institutes.

At the heart of the speculation is how the finance ministry would provide for that extra Rs 2,400 crore that it has now allocated for higher education. Sources say a 1% higher education cess, either on all central taxes or on high-income groups, could have been the answer. If it is levied on all taxes, on the lines of the 2% education cess, it could yield as much as Rs 5,000 crore.

The question is whether in a year that has seen record tax collection and the Centre is flush with funds is a new cess on the tax-paying populace desirable? Experts say a dedicated cess for higher education may be the only way the sector would get the requisite funding, as was the case with Sarva Shiksha Abhiyan and mid-day meal programme. On the other hand, finance ministry sources indicate that a dedicated cess may not be the preferred way to finance the sector.

There is speculation that some of the money collected under the Prarambhik Shiksha Kosh — elementary education fund, into which the 2% education cess flows — could be diverted to higher education, given the high tax collection. However, diversion of funds could face roadblocks as taking funds away from elementary education may be viewed as a violation of the promises made in the common minimum programme.

The HRD ministry would have liked an even higher allocation given that it has plans for new IITs and IIITs in every state, and new Indian Institutions of Science Education & Research (IISER). However, for the expansion programme mandated by the Moily Committee, the Rs 3,000-odd crore that has been allocated will suffice. It would seem that the absorptive capacity of the institutions will not permit utilisation of more funds in the first year.

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