Tuesday, February 26, 2008

Funding Basic Education through Cess Pool

by Phillip Horton

The two percent education tax levied upon tax payers of India means that the load of funding basic education in India is straight on the shoulders of the tax payers. Ever since the introduction of the education cess the cess pool has been accounting more and more for basic education in India. There are now signs that for the coming financial year that is 2008/2009, the share of the cess pool will be quite considerable in that rupees 21,100 total funds will be allocated towards basic education schemes like Sarva Shiksha Abhiyan and the mid-day meal. Thus the share that the cess pool will have towards basic education is quite sizeable. The share of the cess pool in the earlier financial year amounted to as much as 57.7% that is 10, 393 crore rupees of the total 17,995.02 crore rupees assigned for basic education schemes like the ones mentioned above.

Even if the provisions in the budget for the basic education schemes increase the total support provided by the budget towards the basic education schemes is dropping. The two percent education cess began to be charged from the 2004-2005 budgets and this provision was apparently introduced by the policy makers to make sure that more funds come to the basic education sector which was the promise the UPA government had made in its common minimum program. The education tax is charged on every central tax which includes taxes like income tax, corporate tax, custom duty and service tax. However the case is not that the government is shunning away from its duty of supporting basic education, by way of greater allocations and expenses for Sarva Shiksha Abhiyan, mid-day meal programme and the Kasturba Gandhi Balika Vidyalayas, the government only wants the Indian tax payers to directly fund the basic education through the education cess.

The burden of providing funds to basic education did not come suddenly on the education cess on the contrary it was introduced slowly. The education cess in the financial year 2006-2007 had a share of Rs 8,746 crore, which is almost 55 percent of the overall expenses towards basic education schemes like SSA and mid day meal that the cess funded. The total expenditure on basic education in the 2006-2007 financial year was about SSA and mid day meal. Given these numbers the support from budget for these two basic education schemes stands at Rs 6,972 crore. Thus the collective budgetary provisions for the two basic education schemes stand a bit higher than the Rs 5,442.97 crore it received in the financial year 2003-2004.

Even though the government introduced the education cess in 2004 it was not until the year November 2005 that that the Prarambhik Shiksha Kosh got introduced by the government. According the cabinet decision the Human Resource ministry cannot use the funds collected from cess unless it first uses the funds provided in the budget for basic education. The HRD ministry had asked to fix the base level annual budgetary provisions at the allocation in 2004-2005 and it also wanted five percent yearly increase.

 

 

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