Centre sitting on Rs 48,000 crore raised as additional taxes for school, higher education: CAG, budget data

More than Rs 48,000 crore collected by the centre in additional tax or ‘cess’ to fund secondary and higher education in six years is yet to be utilised, show figures from two recent Comptroller and Auditor General (CAG) reports and budget documents. This amounts to almost 64% of Rs 75,542 crore the central government levied for this purpose.

The low spending has become a cause for concern for the CAG as well as academics, who are worried about its impact on various developmental programmes funded through this cess. It may also have a bearing on the centre’s vision of universalising education up to secondary level by 2030 and achieving 30% gross enrolment ratio (GER) in higher education by 2035, as spelt out in the National Education Policy (NEP) 2020.

The national watchdog's review of the union government’s finances in the years 2022-23 and 2023-24 reveals that, of Rs 75,542 crore cess collected between 2018-19 and 2023-24 to pay for secondary and higher education, only around Rs 52,083 crore – barely 70% – has been transferred to the designated reserve fund created for this purpose. Further, according to the actual 2022-23 and 2023-24 spending figures from the 2045-25 and 2025-26 budget documents respectively, only half of the transferred amount – Rs 27,524 crore – was actually spent by the centre,

The shortfall is in contrast to the excessive transfer to the designated fund for primary education, which has received Rs 1.81 lakh crore in this duration, surpassing the Rs 1.5 lakh crore cess money earmarked for it. The transferred funds for this purpose were fully utilised, at least in the audited years of 2022-23 and 2023-24. The CAG reports were published last week.

Education cess, fund transfers

The two reserve funds – Prarambhik Shiksha Kosh (PSK) for primary education and Madhyamik and Uchchatar Shiksha Kosh (MUSK) for secondary and higher education – are financed through the 4% Health and Education Cess (HEC), which has been levied since 2018-19 by the union government. This cess had replaced the 3% education cess.

While half of HEC is apportioned to PSK, a quarter goes to MUSK. The remaining quarter is meant for Pradhan Mantri Swasthya Suraksha Nidhi (PMSSN), which supports flagship health programmes.

Reserve funds, which form a part of the Public Account, are created for specific purposes and are generally financed through cess and other levies. The money is transferred to these funds from the Consolidated Fund of India (CFI), the union government’s primary account for revenue and loan receipts.

The CAG reports show that HEC collection has nearly doubled, from Rs 35,895 crore to Rs 71,159 crore, from 2020-21 to 2023-24. However, MUSK, which is supposed to aid several schemes and institutes under school, higher education and skill development departments, was operationalised only in 2022-23.

The auditor, in its August 2023 report, had criticised the absence of an accounting procedure, which meant that none of the cess amount for secondary and higher education could be utilised in the four-year period between 2018-19 and 2021-22.

While the fund did receive money in the two subsequent years – Rs 14,250 crore in 2022-23 and Rs 37,833 crore in 2023-24 – it’s yet to get around Rs 23,459 crore lying in CFI. It has affected the centre’s spending plans. The school education department, in 2022-23, couldn’t avail of Rs 10,100 crore earmarked for transfer to MUSK. The government cited the delay in approving the accounting procedure as the reason for not making these funds available.

Transfers to Madhyamik and Uchchatar Shiksha Kosh (MUSK) in Rs crore

Low utilisation

The actual utilisation of the cess money is lower still. While the amount given under MUSK in 2022-23 was almost fully spent – barring Rs 27 crore – only a third of higher and secondary reserve funds were put to use in 2023-24, show the budget documents.

The school and higher education departments each spent only around Rs 6,000 crore out of Rs 17,000 crore and Rs 18,500 crore MUSK amount made available to the respective departments. The skill development department used Rs 1,300.5 crore from Rs 2,333 crore it got from the reserve fund.

The reserve fund is shown to have benefited the education schemes including the PM Uchchatar Shiksha Protsahan (PM-USP) and Skill India; central government institutes such as central universities, Indian Institutes of Technology (IITs) and National Institutes of Technology (NITs); and the higher education regulator, the University Grants Commission (UGC).

PSK for elementary education

While MUSK remained unfilled, the central government has consistently transferred excessive amounts to PSK, which funds the flagship Samagra Shiksha Abhiyan (SSA) and mid-day meal schemes.

Transfers to Prarambhik Shiksha Kosh (PSK) in Rs crore

Despite the relatively higher transfer – Rs 28,400 crore – to PSK in 2023-24, it was still Rs 1,600 crore short of the budget estimate. The primary education fund money, however, was completely disbursed in 2022-23 and 2023-24.

The auditor, in its reports, has been flagging short transfers to reserve funds, which results in the programmes being funded through the gross budgetary support (GBS). This, according to experts, not only defeats the purpose of having special purpose funds, but also runs afoul of the constitutional provisions.

“Despite CAG of India pointing this out again and again, the finance ministry has not changed this practice. It's a methodical effort to erode the clear demarcation between CFI and Public Account,” said a faculty member at a Bengaluru university.

‘Savings’ in education

The auditor also flagged persistently low expenditure in various departments and schemes, including those related to education, compared to the budgetary allocation. This is labelled as “savings” in the reports.

The school education and literacy department is among the six union departments cited in 2023-24 CAG report for the largest ‘savings’ or non-expenditure of earmarked funds over the past few years.

There’s, however, a considerable drop in the unspent amount on school education from Rs 22,027 crore in 2020-21 to Rs 5,148 crore in 2023-24, accounting for 4.74% of the sanctioned provision. By comparison, the higher education department ‘saved’ Rs 1,303 crore or 2.06% of the budgeted amount.

“The savings column should be read as ‘non-expenditure’ or ‘failure to spend’,” said the teacher. “Within a household budget, savings is a good thing but in a national government budget, savings is a bad thing if it is under social ministries such as health, women and child development, education and drinking water.”

Mid-day Meal Scheme: Unspent funds

Among the budget heads, Pradhan Mantri Poshan Shakti Nirman (PM-Poshan), which covers the mid-day meal programme, recorded the highest non-expenditure of Rs 1,912 crore against Rs 9,226 crore outlay in 2023-24.

It was followed by PM Schools for Rising India (PM SHRI), which got only Rs 332 of Rs 1,865 of budgetary provision. Samagra Shiksha and Rashtriya Uchchatar Shiksha Abhiyan (RUSA) have been highlighted for persistent savings over the past few years.

Among the educational programmes covered by other departments, the Eklavya Model Residential Schools (EMRS), run by the tribal affairs ministry, saw one of the highest amounts of unspent funds – Rs 3,096 crore out of Rs 5,543 crore. While Rs 2,000 crore allocated for the National Research Foundation (NRF) was entirely unspent, barely Rs 85 crore was utilised from Rs 874 crore meant for the Post Matric Scholarship for Minorities.

While no specific explanations were provided by these departments for low expenditure, the report has listed non-receipt of proposals, operational issues, regularisation of expenditure, non-transfer of related funds and unrealistic debt repayment estimates as the general reasons. CAG called for a more accurate budget forecasting to reduce the disparity.

“Persistent savings were registered despite being regularly pointed out in our Audit Reports and the advisory issued by MoF on realistic budgeting on the directions of the Public Accounts Committee. We recommend a renewed focus on improving the forecast accuracy in budget estimation in view of persistent saving of ₹5,000 crore and above in various grants,” reads the 2023-24 report.