Cabinet approves fund for secondary, higher education

The Union cabinet on Wednesday approved the creation of a non-lapsible corpus fund for secondary and higher education, to help fund select education schemes for which demand exceeds budgetary allocations.

The corpus—Madhyamik and Uchchtar Shiksha Kosh (MUSK)—will have all the proceeds from the 1% cess the government collects under the ‘secondary and higher education cess’ which has been in place since 2007, a cabinet statement said on Wednesday.

To begin with, the fund may have a corpus between Rs3,000 crore and Rs5,000 crore, according to estimates re;eased by the human resource development (HRD) ministry .

The fund will be akin to the Prarambhik Shiksha Kosh (PSK) already in place since 2005 to fund elementary education schemes such as Sarva Shikha Abhiyan (education for all). The government collects a separate 2% cess for PSK.

The fund will cater to schemes such as interest subsidy on education loans, education credit guarantee fund, scholarship schemes, girls’ education schemes and a scheme that funds higher education in states.

Money from the MUSK corpus will be an extra budgetary provision, meaning it would be utilized at times when demand for these educational schemes goes up and all budgetary allocations available with the HRD ministry have been exhausted.

“In any financial year, the expenditure on ongoing schemes of the department of school education & literacy and department of higher education would be initially incurred from the gross budgetary support (GBS) and the expenditure would be financed from the MUSK only after the GBS is exhausted,” according to the cabinet statement.

It will be a non-lapsable reserved fund, meaning if the amount collected in a year is not utilized, it would be carried forward.

So far, there has been no such provision and cess collections are deemed utilized as part of the budgetary provisions.

There is, however, some confusion over cess collection as most of the cesses have been merged with the goods and services tax (GST).

“There are two possibilities— one, they may be talking about pulling in the old collections via that secondary and higher education cess, and second, the education cess is still prevalent in customs even after GST came in,” said R. Muralidharan, senior director (indirect taxes) at consulting firm Deloitte India.

To be sure, MUSK was planned by the United Progressive Alliance (UPA) government in 2010 but it could not muster inter-ministerial support, especially from the finance ministry.

In July 2010, a draft cabinet note was circulated by the HRD ministry, proposing to create a non-lapsable fund in the public account called MUSK which would be a receptacle for the proceeds from the secondary and higher education cess.

The views of concerned ministries viz the then Planning Commission, ministry of development of north eastern region, and department of economic affairs (DEA), ministry of finance were sought in this regard, the cabinet statement said.

“The DEA did not agree to the proposal (in 2010) on the grounds that the budget allocations for the schemes of secondary and higher education have been far more than the amount of 1% cess collected. Therefore, the amount of the cess collected is deemed to have been fully allocated for the schemes of secondary and higher education in the respective financial years. Hence, funds on account of 1% cess for the past period are not available now for allocation,” the statement said.

The cabinet’s approval for creating the corpus comes after the human resources ministry moved afresh on the scheme which had been on hold since 2010.