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Education cess: Ring fencing need of the hour

Harish Damodaran
Mamuni Das

New Delhi , July 11

THE Government expects to mobilise a total sum of Rs 4,910 crore during the current fiscal alone from the two per cent education cess levied on all Central taxes in the 2004-05 Union Budget.

In his speech, the Finance Minister, Mr P. Chidambaram, had assured that "the whole of the amount collected from the cess will be earmarked for (primary) education, which will naturally include providing a nutritious cooked mid-day meal".

However, what the Budget does not provide for is a specific `public account' mechanism similar to the Central Road Fund (CRF) or Special Railway Safety Fund (SRSF) to back up this assurance.

To illustrate, all of us pay a levy of Rs 1.50 per litre of diesel and petrol, the monies from which accrue to a dedicated CRF in the Public Account of India, created through a CRF Act, 2000.

This ensures that the sums mobilised from the levy (Rs 5,361 crore this year) is used exclusively for road development and is further non-lapsable.

There is a similar cess of 14 paise imposed on every kg of sugar that goes to a Sugar Development Fund (SDF) under the SDF Act, 1982, which is used for financing modernisation of mills, etc.

Rail commuters have also since October 2001 been shelling out a surcharge of Rs 1-100 per ticket, which is earmarked towards a non-lapsable SRSF, set up to execute safety-related works.

But for the education cess, there is no such dedicated, non-lapsable fund proposed to be created, which will guarantee `ring-fencing' so that the revenues raised from the cess is used solely for the intended purpose.

The concern here springs from the fact that the overall budgeted Plan outlay for elementary education during 2004-05 is Rs 5,752.53 crore, which is only Rs 533 crore higher than the revised estimate of Rs 5,219.47 crore for 2003-04.

Within this, the outlays for the Sarva Shiksha Abhiyan (SSA) and the Mid-Day Meals (MDM) scheme are slated to rise from Rs 2,732.32 crore to Rs 3,057.08 crore and from Rs 1,375 crore to Rs 1,675 crore, respectively.

It appears, then, that the additional outlay proposed for elementary education this year (about Rs 533 crore) is way below the Rs 4,910 crore to be mopped up from the two per cent cess.

The question, then, is what is the need to mobilise almost 10 times the additional fund requirement (as per the Budget estimate) through the cess?

Officials maintain that the entire Rs 4,910 crore to be raised will be utilised for primary education.

The Budget has made a lumpsum provision of Rs 10,000 crore for new schemes to be launched in order to meet the objectives of the Government's common minimum programme (CMP).

This is reflected in the Ministry of Planning's outlay, which is budgeted at Rs 10,130.88 crore for 2004-05, against just Rs 47.41 crore for the previous year.

"The cess money will initially form part of the Rs 10,000 crore lumpsum provision. Once the Planning Commission completes an exhaustive review of all the current schemes and tailors them to suit the CMP objectives, the funds will be re-allocated to the various Ministries concerned. The final outlay for elementary education will accordingly be much more than the budgeted Rs 5,752.53 crore," the officials said.

The problem, though, is that the lumpsum provision made covers not just SSA and MDM but assorted other schemes such as Food for Work, Basic Health Care, Railway Safety, Drinking Water and the Accelerated Irrigation Benefit Programme.

Experts fear that in the absence of ring-fencing, which the creation of a dedicated Education Fund in the Public Account alone can ensure, there is every possibility of the cess monies getting drowned in the Rs 10,000 crore pool.

More Stories on : Budget | Education | Taxation

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