Education Cess - Where did the Money Go?
IN his 2004 Budget speech the then Finance Minister Mr. Chidambaram said,
In my scheme of things, no issue enjoys a higher priority than providing basic education to all children. The NCMP mandates Government to levy an education cess. I propose to levy a cess of 2 per cent. The new cess will yield about Rs.4000-5000 crore in a full year. The whole of the amount collected as cess will be earmarked for education , which will naturally include providing a nutritious cooked midday meal. If primary education and the nutritious cooked meal scheme can work hand in hand, I believe there will be a new dawn for the poor children of India.
What happened to the new dawn? And what really happened to the whole of the amount collected as cess?
The CAG in its latest report to Parliament studied the issue, which revealed some startling facts.
A non-lapsable fund for elementary education known as Prarambhik Shiksha Kosh (PSK) was created in 2005-06 under non-interest bearing section of the reserve funds in the Public Account. This fund is meant to meet the expenditure requirement for elementary education under the schemes of Sarva Shiksha Abhiyaan and Mid-Day Meal Scheme. The education cess collection was initially credited to the Consolidated Fund of India and subsequently transferred after obtaining the Parliamentary authorisation to the PSK to finance the expenditure on elementary education.
During the period 2004 to 2014, against the total collection of Rs. 1,30,599 crore of education cess in the CFI, only Rs.1,19,197 crore was transferred to the PSK, resulting in short transfer of Rs. 11,402 crore.
SHE is worse : In 2007, the same Finance Minister levied a Secondary and Higher Education (SHE) Cess of 1 per cent in addition to the 2 per cent education cess levied in 2004. The Finance Minister told Parliament in his budget speech, "I have a proposal regarding the cess for education. While the cess of 2 per cent on all taxes to fund basic education will remain, I propose to levy an additional cess of 1 per cent on all taxes to fund secondary education and higher education and the expansion of capacity by 54 per cent for reservation for socially and educationally backward classes."
What happened to this money?
From 2007 to 2014, they collected Rs. 52,268 crores as Secondary and Higher Education (SHE) Cess. However, unlike the creation of PSK in the case of primary education cess, neither a designated fund was created to monitor the deposit of proceeds of SHEC nor schemes identified on which the cess proceeds were to be spent. Consequently, the utilisation of cess for furthering the cause of secondary and higher education as envisaged in the Finance Act was not ascertainable from the Union Accounts.
In 2009, the Minister for HRD told the parliament, "Regarding 1% additional cess for Secondary & Higher Education, only Gross Budgetary Support is provided to Department of Higher Education (HE) to meet its budgetary requirement & no separate allocation is made from the funds generated from this 1% additional cess."
The Government's only justification is that the funds allotted to the HRD Ministry are more than the education cess collected. Is this fair? You collect tax from me for a specific purpose and you don't know what happened to the money.
Please also see our Guest Column article Subsuming of Education Cess on Excisable Goods.