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Higher education financing Background

EY FICCI Higher Education Summit Making the Indian higher education system future ready November 2009. Higher education financing Background. Complex structure for public financing of higher education involving UGC, AICTE, Ministry of Health, Department of Higher Education

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Higher education financing Background

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  1. EY FICCI Higher Education SummitMaking the Indian higher education system future readyNovember 2009

  2. Higher education financingBackground • Complex structure for public financing of higher education involving UGC, AICTE, Ministry of Health, Department of Higher Education • Public expenditure on higher education in India estimated at 0.60% of GDP, with the US at 1% and UK at 0.90%. • Gap more apparent for public expenditure per student - USD 1,162 in India versus USD 10,616 in the US and USD 10,060 in the UK • Central Government accounts for majority public expenditure (67% in 2007-08, of which 35% was non-plan expenditure) • Central government has higher share of spending on technical education while state governments account for a majority of the spending on general education

  3. Higher education financingResults of EY-FICCI survey • For nearly half of the public HEIs surveyed, Government funding accounted for 80% of income. 75% of the public HEIs charged less than INR 50,000 per student per annum • Majority of the private HEIs surveyed relied on student fees for income, with about 30% charging an average fee of INR 100,000 per annum • 2/3rds of the higher education institutions surveyed did not have student loan facilities • Almost 60% of the institutions surveyed did not generate any endowments • Regulation of fees, attracting private investment and limited government grants showed as the key financing challenges faced by HEIs

  4. Higher education financingKey challenges • Public fund allocation is not a transparent process and seems to be skewed towards certain groups of HEIs • ~40% of the Union Budget for Technical Education for 2009-10 was allocated for the IITs and ~40% of the funding for medical education from Department of Health is allocated for AIIMS • Tuition fee at HEIs suppressed at unsustainable levels • Proportion of fee in total income for HEIs declined from 37% in 1950-51 to 12% in 1986-87 • Tuition fee as a percentage of total expenditure on higher education in 2007 stood at ~19% for India vis-à-vis ~36% in the US • Inadequate student financing schemes and scholarships to support rational fee structure • Interest rates for education loans much higher in India (11.75% in 2005) compared to other countries (US - 3.37%, UK - 3.37%) • ~1% students in India availed student loans in 2005 compared to 85% in the UK • Gross under-utilisation of alternate revenue streams (differential fees, research & consultancy services)

  5. Higher education financingWay forward • Encourage private sector funding through PPP by creating an enabling regulatory framework as well as a fiscal incentives to enhance interest • Introduce performance based funding mechanism to enhance impact of public funding • Rationalise fee structure to internationally accepted levels (~25% of income) supported with strong student financing system • Support development of alternate sources of revenue such as endowments, public usage of HEI assets, monetisation of IP • Improve financial management at HEIs through training and by increasing access to finance professionals

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