India Education sector’s link to black money

Speculations are that a big part of this money goes to politicians and bureaucracy as a large number of institutes are owned, controlled and managed by politicians and business houses

There was a time, not long ago, when education was a noble profession. Creating a school or college was a pious act. There was neither capitation fee, nor donations, nor back-breaking fees. A pupil taking private tuitions was considered as a failure of teacher.

But, today education has become big business. Following is standard norm of upfront payment also called donation or capitation fee, at various stages of education –

1. Play Group / Pre-KG – Rs. 36000-60000 per year
2. Junior KG – Donation in range of Rs. 30000-5 Lakhs with fee in the range of 2000-10000 per month.
3. 11^th – Donation in range of Rs. 2-5 Lakhs. Fee excluded
4. Under graduation admission (Fee excluded) –
   1. Medical (MBBS) – Rs. 30-60 Lakhs as donation
   2. Medical (BAMS and others) – Rs. 3-8 Lakhs as donation
   3. Engineering – Rs. 2-6 Lakhs as donation
   4. Management (BMS) – Rs. 2-10 Lakhs as donation
5. PG Admission (Fee excluded) –
   1. Medical – Rs. 1-4 crores as donation
   2. Management – Rs. 10-20 Lakhs as donation

Cost to Society
Let us try to calculate the total cost of the above donations to the society.

1. At kids admission stage –

The phenomenon of donation at kid’s admission stage is prevalent in cities (Metro / Urban areas). Parents, who can afford or manage somehow, want to admit their children to so-called convent or English medium or higher quality schools. The shortage of these types of educational institutions compared to demand, screates a skewed equation in favour of the institutes.
India’s population is about 125 crores. Birth rate is 20.24 (after providing infant mortality rate of 50/1000 births) per 1000 in 2013. This means addition of 2.5 crores of children per year.
About 30% population in India lives is Metro/Urban areas. This means 75 lakh babies per year in metro / urban centers. An estimated 80% of the population of metro / urban centers is less-than middle class and BPL families. Their children go to municipal or government aided schools, where this menace of donation does not exist. This donation / capitation fee is prevalent in metro and urban areas among financially middle class and higher income families, which form about 20% of population.
This 20% urban kid’s population means 15 lakh babies per year. The going donation rate in Mumbai is Rs30000 to Rs5 Lakhs. In Delhi NCR also, the rate is similar. If we take an estimated median as Rs1,00,000, the amount of donation comes to Rs15000 crores per year. Almost all of this money is unaccounted or black money.
These figures look big, but on revalidating assumptions, They may even turn out to be on the conservative side.

2. Admission to 11^th, after passing 10^th –

A college of choice costs Rs2-5 lakh. In Mumbai Metro Region (MMR), there are 172,000 seats. Most get alloted as per the merit list. There is some management discretion though, it is said that about 15% seats are allotted either to less than cut-off marks or where students want a specific college, which is out of the management/minority quota. In this way about 25000 seats are allotted with payment of capitation fee or unaccounted donation. The going rate is between Rs2 lakh and Rs5 lakh, depending upon the college. If we take the lower figure of Rs2 lakh, for 25,000 students the amount is Rs500 crore. This is only in MMR. If the same is mapped to only urban areas, which has 20 times the population of MMR, the amount becomes Rs10,000 crore per year.
3. Admission to Under graduation courses –

Medical (only MBBS) – There are about 50,000 seats all over India. About 60% are filled through various entrance exams like CET etc. 40% of the seats are filled by management quote (called MQ) and NRI quota. This is done all over India in over 300 medical colleges. At the average rate of Rs. 45 lakhs per seat, the unaccounted money in the form of capitation fee for 20000 students becomes Rs. 9000 crores per year. This is only for MBBS. There are other courses, where capitation fees at lower amounts are prevalent.

These are: MD/ MS, BDS, MDS, BHMS, BAMS, BPT, MPT, D Pharm, B Pharm, M Pharm, B.Sc, PBC, GNM, M.Sc (Nursing). It is difficult to estimate the number of eats in these courses, but the capitation/management quota fees vary from Rs3 lakh to Rs8 lakh.
Engineering – There are 14.73 lakh engineering seats in over 3,345 engineering colleges in India. AP has 3.40 lakhs, TN has 2.36 lakhs, Maharashtra has 1.46 lakhs and UP has 1.36 lakh seats. About 10% go unfilled. About 20-25% seats are filled with management and NRI quotas at a rate of Rs2 lakh to Rs6 lakh, depending upon state, location and reputation of college. If we take a conservative average of Rs3 lakh / seat for over 3 lakh seats, the amount of capitation fee comes out to Rs9,000 crore per year.

Management (undergraduate level, BMS/BBA) – There are approx 1,50,000 BMS / BBA seats in India. About 20% are allowed for Management Quota and NRI quota. These seats are sold for Rs2 lakh to Rs10 lakh each. Thus, for 30000 seats at a minimum rate of Rs2 lakh per seat, the money generated is Rs600 crore.
4. Admission to professional PG courses –

Medical (MD /MS) – Total 11,000 seats are available in 300+ medical colleges. 50% (5,544 for 2014) are reserved for All India Quota (AIPGMEE). 25% for state quota and rest are Management and other Quota. About 2,800 seats are sold in the range between Rs1 crore and Rs4 crore. It is an open secret that seats of the state quota are also sold by political interests. Let us just consider these 2,800 seats. Even at a minimum of Rs1 crore, the total unaccounted money is Rs2,800 crores.

Management (MBA/PGBDM/etc.) – There are about 2,00,000 MBA seats offered by over 2,000 colleges in India. About 80% of these seats are from not so popular colleges and most of the students are unemployable after the course or the seats go vacant. Still, a fee of Rs2-3 lakh per year is charged. Out of the remaining 40,000 seats, 50% are offered by IIMs and other sarkari or comparable institutes, where there is no donation but the fee is high. The balance 20,000 seats are sold for Rs8-20 lakh. The director of one institute was raided thrice and every time money was recovered, but in a few days, the activity resumed again. This generates about Rs2000 crores even at a rate of Rs10 lakhs per seat.
The total sum calculated till now, only for capitation fee or donation per year becomes –

Stage of education	Rs
Junior KG	15000 crores
11th	10000 crores
MBBS	9000 crores
BE / BTech	9000 crores
BMS / BBA	600 crores
PG – Medical	2800 crores
PG – Management	2000 crores
Total of above	48400 crores

This is equal to approximately 0.8% of Indian GDP and 73.5% of the total budget allocation to HRD ministry for 2013-14. Total budget for HRD ministry for 2013-14 was Rs65,867 crore.
There are other courses like education, para-medical, hotel management, etc. where capitation fee is charged, which are not considered above.

Where does this money go?
Nobody officially knows where this money goes. In fact, officially this money does not even exist. This money is what is usually termed, Black Money. Speculations are that a big part of this money goes to politicians and bureaucracy as a large number of institutes are owned, controlled and managed by politicians and business houses. Discreet enquiries reveal that a part of this money may be stashed away abroad, a part may be used for elections, some part may be used to fund and sustain real estate activities.

In the next part of this two part study on the ills and effects of black money, we will see the effects this black money has on Indian society and economy.

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