Public Institutions in India Consider New Methods of Financing

Provincial-level private higher education in India has shifted from a mostly public-funded system to a mostly private-funded system, putting increased pressure on family contributions.

October 22, 2018

Indian higher education system has experienced a major transition during the last decade not only in terms of the massive participation of diverse students in higher education but also due to the participation of new private HEIs in general, as well as technical courses. The changing institutional landscape is the result of the structural adjustment policies and new economic reforms that encourage market influences in higher education decision making. In response to policy changes, the public HEIs (PHEIs) have also undergone a major transformation, adopting privatization measures due to a decline in funding by the central and provincial governments. Along with privatization measures the provincial universities practice several cost-saving measures that have non-inclusive implications.

Decline in public funding

India achieved massification of higher education (with 15% GER) in 2009—total enrolment in higher education has grown from 20.7 million in 2009 to 34.6 million in 2018.  By 2015/16, the gross enrolment ration (GER) had reached 24.5%. There was a rapid expansion in the number of HEIs—private and public. Public funding has not kept pace with expansion. The expenditure on university and other tertiary education as a percentage of GDP by central government has declined from 0.34 percent of GDP in 2009-10 to 0.22 percent in 2014-15; the share contributed by provincial governments declined from 0.56 percent to 0.44 percent during the same period.

Provincial-level PHEIs in India have shifted from a mostly public-funded system to a mostly private-funded system (putting increased pressure on family contributions) with few exceptions. The recurring grants from provincial governments and non-recurring grants from the central government taken together meet 70% or 50% (or at times 30%) of the annual expenditure of provincial PHEIs. Various strategies are being adopted by these provincial HEIs to compensate for the resource gap in response to decline in public funding.

Strategy I: Cost-sharing measures

The most common cost-sharing measure is student fees and the addition of courses that operate under a self-financing scheme that covers the cost of teaching and non-teaching staff charged directly to students as fees, unlike regular courses in PHEIs where the recurring cost of salaries and other allowances for teaching and non-teaching staff is borne by the university or college, particularly in provincial colleges. Apart from tuition fees, there is an examination fee, a “development fee” charged to students to support infrastructure development (e.g.; labs, auditorium, smart classrooms, etc.) and an annual/semester fee that results in a major chunk of provincial university income. A “Back Paper Syndrome” (a term commonly-used for students who repeatedly fail to pass a semester due to anxiety and must reappear for exams by paying fees for each appearance) results in a fee collected from deprived groups that exceeds the amount collected from students in the general category at many provincial universities. The development fee is increasing annually across institutions.

Although, there are student protests against hikes in tuition fees and exemptions for deprived groups, the overall fee structure is regressive as every student, irrespective of socio-economic background and gender, has to pay all other fees. Offering courses through distance education is trending as a cost-sharing measure by provincial universities.

Without any stringent rules for fee structure at the policy level for self-financing courses, the higher fees for courses (typically in technical or job-oriented area) offered under self-financing mode are justified by HEIs claiming that they provide advanced level skills that would improve the improve employability upon completion of the course). These courses increasingly contribute to the income of aided colleges at provinces.

Strategy II: Income generating activities

To respond to resource shortages, initiatives for leveraging resources are being employed such as renting out university infrastructure and outsourcing institutional activities. Unlike centrally-funded HEIs, few provincial universities have infrastructure of sufficient condition or quality to rent them out to generate revenue although some government-aided colleges have successfully explored this strategy to a limited extent.

Similarly, the generation of revenue from the outsourcing of university services like food service, security, canteen, cafeteria, health centre etc. have contributed some income to provincial universities, but not to the colleges.

Popular income-generating measures such as endowment funds, alumni contributions or other philanthropic gestures are not significant factors for provincial PHEIs. This celebrated method of income generation in developed countries through research contracts, consultancy services, organizing workshops, seminars and conferences and international student mobility holds very little opportunity for provincial PHEIs with very few exceptions.

University-industry linkages have recently picked up in India in technical and professional courses, but remain limited options for most PHEIs. Some amount of income is also generated through recovery of loans and investments in fixed deposits by PHEIs.

Strategy III: Cost saving measures

The most commonly practiced response to the resource crunch is to have add enrolment and manage with guest faculty, reemployed (retired) faculty, part-time or temporary non-academic staff with lower remuneration to cut salary and non-salary expenses. Multitasking by both academic and non-academic staff is another cost-saving measure despite the probability of compromising with quality of both teaching and learning and administration.

Another important adjustment being made is to distribute scholarship/fellowship allocations meant for one student among 3-4 students from marginalised groups such as Scheduled Castes (SCs), Scheduled Tribes (STs) and Other Backward classes (OBCs), women and minorities. Here the very purpose of scholarship fails.

There are cuts to other academic expenses too, such as sharing of rooms and computers by academic and non-academic staff, reducing subscriptions to print journals and shifting to online journals, using outdated textbooks, and cutting down other administrative, repair and maintenance expenses. The plight of the affiliated colleges in the provinces, institutions that can run degree programmes, but are not empowered to award degrees unless they attached to a university, is becoming pathetic.

Conclusion and Way Forward

Unlike centrally-funded HEIs, the provincial PHEIs confront mounting expenditures,  growing enrolments, and resources shortages due to the decline in public funding. They subsequently resort to higher tuition fees, self-financing courses, and various cost-saving measures that compromise academic quality, access to higher education by deprived groups and impact the mid and long-term growth and development of these institutions.

There is need for policy interventions prioritizing development grants to provincial universities and colleges if they are to reach a level of competitiveness and quality in the near future as those institutions are rapidly deteriorating.


Jinusha Panigrahi is assistant professor and co-chairperson, Centre For Policy Research in Higher Education (CPRHE), National Institute of Educational Planning and Administration in New Delhi and co-chairperson, Economics and Finance of Education Special Interests Group of the Comparative and International Education Society (CIES), USA


Be the first to know.
Get our free daily newsletter.


Back to Top