Did you know education is a big source of black money? Read on

The education sector is a big source of generating and parking black money, according to a study conducted by the National Institute of Public Finance and Policy (NIPFP).

The NIPFP's report, prepared about a year ago, has not been made public, but was accessed by the Economic & Political Weekly magazine in its 29 April issue.

In the 1,000-page report, a chapter addressing the avenues of generating black money in various sectors says historically, in addition to the government, not-for-profit organisations have provided education as a charitable activity. However, this scenario has undergone major changes in the past 20 years, in what is one of the biggest education systems in the world.

Since education is treated as a not-for-profit activity, and most schools are run by trusts in the country that cannot book profits, the report says there is a practice of creating companies that own land and build infrastructure, and then lease these out to a trust on rent to run the school.

“Another practice that is used to book profits by trusts is to hire professional companies to run and maintain the school by claiming share in the fee. Societies running schools are entering into partnerships with real estate companies to build a school in upcoming real estate projects,” the report says.

While the former cannot make profits, the latter can, the report points out.

Donations for admissions

There is no or little transparency in the admission process, says the report.

One of the most common practices in admissions at school level is coercing parents to give donations of various types to the school.

Capitation fee and management quota

The report says: “Management quota comprises 20-25% of the total number of seats. While colleges are required to admit students on merit and charge them a state-fixed rate for three-fourths of their places, the quota is their avenue to make money from students who haven't secured the marks but are desperate for a professional degree.”

It points out that there are around 400 medical colleges in India, and most of them are private. According to the study, capitation fee charged by private medical colleges averages between Rs 8 lakh to Rs 50 lakh for admission in MBBS courses, while for admission in MD courses, the capitation fee can go up to Rs 1 crore per seat.

The report has calculated the total amount of capitation fee charged by medical, dental, engineering and MBA colleges per year at Rs 5,953.22 crore for a year.