India Needs Bold Pricing Reforms To Ensure The Fee Reflects The True Value Of Education

The last couple of decades has seen a significant expansion of education in India across all education levels.

Be it primary education, secondary or college education, the fact that more Indians are finishing college augurs well for productivity-led growth of the Indian economy.

Underlying the education revolution is a broad trend of greater privatisation, especially at the higher education level. Several private institutions have emerged as centres of excellence as far as teaching is concerned.

Some of them have strong research departments as well. Therefore, clearly, private education institutions have started to surpass some of the public higher education institutions.

This should not be a cause of concern, especially because some of the finest universities of the world are, in fact, private institutions.

The profound question, especially in the wake of the Jawaharlal Nehru University protests over a hike in university fee is with regards to the higher education system that we want in our country.

More importantly, it is to do with who pays for the higher education, the state or student?

There are arguments for the cost of education to reflect the true cost of production of the service or, perhaps, even the value of education to each student.

There are no grounds to justify the curious case where a student of a private school with fees to the tune of thousands of rupees per annum pays less than a thousand rupee per annum while obtaining a higher education degree — either at Delhi University or at Jawaharlal Nehru University.

This reflects the sad reality that our public institutions are yet to charge a fair fee from students.

Nobody is denying the need to offer scholarships to deserving students from lower income families.

However, the fee of a programme should ideally reflect a fair cost of production of the education service.

What is required is an extensive system of scholarships that ensure that those who can’t afford higher education are given the necessary financial support for the same.

Such a transition would unlock a lot of central government resources which can be better utilised for establishing research grants and fellowships.

Moreover, there’s a need to further encourage the use of education loans, especially for management programmes at the graduate (read as post-graduate) level.

There is a need to link the tuition fee with the potential value that a student is likely to derive over a period.

That is, if, after paying a fee of Rs 8 lakh for the programme, the average package of a graduating class is Rs 24 lakh, then there’s a mismatch and the tuition fee doesn’t reflect the value of education that is being provided at the institution.

Successful universities, even in the developed economies, have high tuition fee for college education. Such high fees allow the university to generate adequate resources to finance research across different departments.

The difference in approach to pricing is like the idea of an education voucher as in this case, the fair cost of production of higher education is reflected in the tuition fee while the state only provides for a consumption subsidy in the form of scholarships.

Therefore, resources are better targeted under a scholarship system. A comprehensive ecosystem of scholarships must be created in India that is based on two distinct factors – first is to do with merit, irrespective of the economic background of a student, and the second, is to do purely with the economic background of students.

If a student from a weak economic background gets admitted into IIT Delhi, then he must be provided with a comprehensive scholarship and stipend to ensure he continues with his studies.

Moreover, we need to incentivise the private sector and philanthropists to set up scholarships at different universities in order to create a public-private network of scholarships that ensure quality education is provided irrespective of the financial background of the student.

As far as existing resources deployed to the education sector is concerned, we looked at the 2014 NSSO 71st round social consumption survey on education, which provides interesting findings for the extent of private expenditure.

The private expenditure on education is approximately 2.4 per cent of our Gross Domestic Product (GDP).

This shows the extent of value Indians place on quality education – however, our public colleges are yet to reflect this in their tuition fee.

The government has expressed its desire to increase public expenditure on education to 6 per cent, which will further increase the amount of resources that are devoted to the education sector.

However, despite such resources, the sector is yet to produce universities that can compete with some of the best in the world.

The motivation behind the institute of imminence tag was to precisely identify winning universities and award them with greater resources to help them catch up with global leaders.

However, world class education institutions are known primarily because of their research rather than their teaching.

In fact, it is their quality of research that has a positive spill over effect on their teaching, as students at such institutes get to be first-hand witnesses of path-breaking discoveries daily.

It is further important to recognise that the value of education is intricately linked with the quality of education being provided and this depends on the strength of the research departments at the higher education level.

To truly achieve the full potential of our higher education system, we need to undertake bold pricing reforms to ensure the fee reflects the true value of education.

Only then, will we generate adequate resources to support a world-class higher education ecosystem and emerge as the go to destination for foreign students.