States are failing to spend their education budgets – because the budgets are too low

The Comptroller and Auditor General of India has found that states failed to spend over Rs 10,000 crores made available to them for elementary education every year between 2010-’11 and 2015-’16.

The auditor’s report, which was tabled in the Lok Sabha on July 21, reviewed the implementation of the Right of Children to Free and Compulsory Education Act, 2009, which makes education a fundamental right for children between six and 14 years of age.

But educationists argue that funds not being spent does not imply that they are not required. On the contrary, they said, chronic low spending on education has created governance systems that are incapable of using the funds. This low utilisation has, in turn, resulted in low allocations under the Sarva Shiksha Abhiyan – the only Central government scheme that supports the implementation of the Right to Education Act. Under the scheme, which was introduced in 2000-’01, states unable to utilise the funds received in a year got less than what was required in the next.

According to Protiva Kundu of the think tank Centre for Budget and Governance Accountability, as the unspent amount accumulated with the states, it led to an “overall shrinking of the budget”, even while schools continued to be starved of funds.

A study by the National Institute of Public Finance and Policy recently estimated the extent of this underfunding. As reported on Scroll.in, the study found that in 2015-’16, twelve states fell short of Rs 82,072 crore required to meet the minimum standards in elementary education under the Right to Education Act.

This shortfall could not have been bridged by better spending alone. As the national auditor’s report shows, in 2015-’16, the unspent funds for elementary education for all states put together came to just Rs 12,411 crore.

It would take unspent funds lying with all states over six years to equal the shortfall in the education spending of 12 states for a single year.

Shortage of staff, resources

The auditor’s report noted that state governments were “constantly unable to utilise the funds ranging from 21% to 41% during 2010-’11 to 2015-’16”. In absolute terms, the amount that remained unspent with states each year ranged between Rs 12,259 crores and Rs 17,282 crores.

In its reply to the national auditor, the Ministry of Human Resource Development was “silent about the reasons for heavy unutilised balances”.

Kiran Bhatty of the Centre for Policy Research explained, “The reason for under-utilisation is that the whole governance structure is highly deficient. There are huge vacancies at every level. Blocks and district offices are under-resourced. The few staff available have to manually fill in hundreds of increasingly complex and detailed forms, designed in Delhi, every month. The entire system is unable to manage.”

Kundu pointed out, “With the existing manual accounting system at sub-district level, schools that have only a cashbook cannot provide annual accounts in the prescribed format in time.” This, she added, “leads to delays in submitting documents to the Ministry of Human Resource Development for release [of funds]”. In some cases, book-keeping is left to the teachers.

Proper utilitsation of funds, therefore, requires more resources. “But the allocation to capacity building, for recruitment of staff for these activities and their training is negligible,” Kundu said.

Delays are endemic to the process. Going by the records for 2015-’16, Kundu said Central funds start coming in by mid-May. “After the sanction order for release of funds is passed, it takes an average of 45-60 days for them to reach the bank accounts of state implementing societies [through which the scheme is implemented],” she said. “From there, funds are released to district and sub-district implementing agencies, within 10 days.”

Sometimes, by the time the money arrives, it is too late for it to be fully utilised before the next instalment is due or by the end of the financial year. This results in a balance amount, which in turn leads to lower allocation the next time around, even if a school needs the full amount.

Funds may also be released in multiple instalments with little prior information to schools on their frequency. Praveen Jha of the Centre for Economic Studies and Planning, Jawaharlal Nehru University, recalled that in 2007, a school in Lalitpur district of Uttar Pradesh received a grant of Rs 10,000 under the Sarva Shiksha Abhiyan in 28 instalments. “Things have improved but only slightly,” Jha said. “How do you expect anyone to plan if there is such ad hocism and uncertainty in the process? You do not know when funds will come, how much and in how many instalments.”

The state implementation societies – different states have different names for them – add to the chaos. These are linked to but typically in conflict with the state education departments, educationists said. “In this mish-mash, the planning process is just lost,” said Bhatty.

Top-down approach

In theory, planning is meant to begin with the individual school and its development plan. These school development plans are collected by blocks, then districts and finally, the state government. Based on them, states are supposed to put together an Annual Work Plan and budget proposal and place it before the Project Approval Board of the Ministry of Human Resource Development, which approves the funds. The ministry, in turn, places its requirement before the Ministry of Finance and allocations are made.

In practice, very few of the above steps are followed and in the right order. Most schools do not submit plans, just a data sheet that they send to the District Information System for Education – the only Centrally-maintained database on schooling. According to the Comptroller and Auditor General’s report, this data, too, is flawed.

Bhatty said, “The state’s [Annual Work Plan and budget] does not reflect the actual need and the Project Approval Board invariably allocates less than what was asked for.”

Furthermore, as the national auditor noted: “The budget proposals… submitted by [the Ministry of Human Resource Development] in October/November… are ad hoc in manner and not based on the [Project Approval Board] approved outlays which are finalised by April of succeeding year.”

By then, the Ministry of Finance has already made the allocations and declared the budget.

What the actual allocation to the scheme is based on, even the auditor could not tell. Its report says:

“The present audit report notes that the budget proposal for [Sarva Shiksha Abhiyan] in the Centre as well as in the States is not based on the inputs received from the implementing agency [in blocks and districts]. The Ministry [of Human Resource Development] has no mechanism to ascertain the out of school children as there is a shortfall in conducting the regular house hold survey by the States.”

Streamlining processes

According to Praveen Jha of the Centre for Economic Studies and Planning, since the Indian Education Commission of 1964-’66 came out with a national education policy, no serious effort has been made to estimate how much quality education for one child would cost. “There is no benchmark either,” he said. “If we take what the Kendriya Vidyalayas [Central government-run schools] spend as benchmark – and no member of any commission would agree to send their children to anything less than a KV in the government system – there is massive underfunding.”

But the unspent balances, the result of mismanagement, are being used to argue that the government does not need to spend more on education. “Over the past three-four years, the entire discourse has changed,” said Jha. “Now, instead of addressing and streamlining the procedural aspects of utilisation, government wants to know why it should give more if funds are not being spent and desired learning levels not being achieved.”

The National Institution of Public Finance and Policy’s paper cautions against conflating the twin problems of unspent funds and underfunding. Authors Sukanya Bose, Priyanta Ghosh and Arvind Sardana write:

“To substitute the problem of resource requirement and planning with the problems of implementation may not be the correct approach. Underutilisation of resources is an issue of implementation that cannot be conflated with the need for resources.”