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Growing Financial Hardships of State Universities

Some Insights from Punjab

Jaswinder Singh Brar ( is at the Punjabi University, Patiala.

Amidst stagnating government grants and out of sync governance structures, affiliated state universities emphasise student-centric funding, putting higher level institutions in a precarious situation. This undermines their functional autonomy and regulatory processes.

Public or state-run universities throughout the country are facing serious problems in management of their finances. It is becoming increasingly difficult for a large majority of them to discharge their committed liabilities particularly the payment of salaries and pensions on time. Some of them resort to over-drafting, borrowing, or premature withdrawals of fixed deposit receipts to make routine payments. Financial pendency is growing due to an unusual delay in payment of normal allowances and retirement benefits—mainly gratuity and leave encashment. The number of court cases has been piling up because of not honouring the payment schedules and admissibility of allowances announced by governments from time to time. The financial position of some universities is so precarious that even a normal delay in release of grants disturbs the financial equilibrium for a longer period. The persistence of such a state of affairs not only distorts the academic priorities but also compromises the societal position and standing of universities. The university administration instead of focusing on qualitative aspects of educational products remains preoccupied with money matters just to keep the wheels of finance moving. This has eroded their functional autonomy and constitutional mandate.

The higher education system in the country changed drastically under new economic dispensation. In addition to central universities, many private universities and other higher education institutions have emerged particularly in professional, managerial, and technical education. However, state universities remain central in the entire structure of higher education because in addition to large-scale on-campus enrolment they grant affiliation and thereby administer and control a large network of colleges in their respective jurisdictions. The determination, standardisation, and upgradation of academic standards along with conducting examinations for affiliated colleges, granting degrees, and maintaining recruitment standards remains an area of huge responsibility of an affiliated state university. In contrast to central universities, these universities are dependent on the state government for developing and maintenance of grants. The share of state universities in overall allocations by the University Grants Commission (UGC) remained on the lower side. For example, during 2015–16, out of total plan grants of UGC (₹4,003.31 crore), the state universities got ₹648.34 crore (17.13%) as compared to ₹1,911.94 crore (50.52%) allocated to central universities. Similarly, in case of non-plan grants of ₹6,066.47 crore, the respective shares were as follows: state universities ₹191.19 crore (3.14%) and central universities ₹3,872.76 crore (63.54%) (UGC 2015–16: 49–50). Infrastructure support from the UGC for creation of labs, special purpose hostels, equipments, sports facilities, computers, financial assistance to specific departments, etc, is critical but remains low as it accounts for a very small proportion of the overall expenditure of such universities on a yearly basis. During grade revision, UGC has so far normally shared the financial burden of enhanced pay of faculty to the extent of 80% for the initial five years. Various national- and state-level bodies also provide limited number of scholarships to meritorious and weaker section students for pursuing higher and research degrees. But, all such measures, programmes, and schemes did not add financial resources directly to salary budgets of state universities.

Student-centric Resource Generation

Public universities embarked on the process of internal resource generation when the rationale of providing subsidies to higher education was questioned by national-level policy circuits by questioning the public benefit provided by higher education. All forms of education were pitted against each other by breaking their mutual organic link with public advocacy, for providing more budgetary resources to elementary education as it generates better externality where social benefits of educational progress outweigh the individual benefits from education to its acquirer for such a level of education. Consequently, fees and funds were raised by universities and other higher education imparting institutions for the first time during the last decade of 20th century. The process of internal resource generation has acquired numerous forms like creation of special seats for non-resident Indians and foreign students, starting of professional and vocational courses in existing departments, establishment of on-campus professional institutions, adding newer types of fees and funds, enhancing admission, examination, sports, and youth welfare-related charges, imposition of affiliation and inspection fees on colleges, etc. Newer, self-financed courses were added and seats in existing courses and programmes of study were increased. Later on, universities realised the need to tap sources of finance other than student fees and funds, and build endowments from donations, alumni contributions, patents, and consultancy fees, etc.

Universities facing a financial crunch invented novel ways to justify resource generation by comparing fees and funds across the courses, universities, and even states. The much-hyped academic collaborations with foreign universities added lesser amounts to their kitty. So, in practice, because of several reasons, resource generation by institutions remained student-centric with negligible success where non-student sources of finance were concerned.

Universities managed their financing during the expansionary phase facilitated by increasing charges from students as well as raising enrolments because of a greater demand for higher education. The situation of finance changed drastically within a span of a decade and a half. The proportion of government grant in overall income of universities declined though it witnessed a rise in absolute amounts. For example, the proportionate share of government grants (Punjab, Union, and UGC) in the overall income of Punjabi University, Patiala was equivalent to 23.21% (₹86.91 crore out of ₹374.40 crore) in terms of average of three financial years 2013–14, 2014–15, and 2015–16. It implies that the amount equivalent to ₹287.49 crore was raised from sources other than government through tuition, admission, registration, and examination fees, and funds in the form of user charges from on-campus, distance learning, and private students, and from students through affiliated colleges.1 Similarly, Guru Nanak Dev University, Amritsar raises ₹185.86 crore (78.8%) from internal sources (mainly fees) and ₹50 crore (21.2%) from government grant with an overall income of ₹235.86 crore for 2016–17 (Guru Nanak Dev University 2016; Tribune 2016). Universities turned up massive financial entities with huge income and expenditure flows. The financial support by Punjab government to the universities varies considerably. During 2014–15, for which actual data figures were available, Punjab government provided the overall assistance of ₹160.63 crore to three affiliated universities and their constituent colleges as follows: Punjabi University (₹75.08 crore); Guru Nanak Dev University (₹53.55 crore); and Panjab University (₹32 crore). Notably, this overall assistance to universities constitutes 0.34% of overall budgetary spending by state on revenue account. The combined share of “universities and higher education” in the overall budgetary spending by the state was equivalent to 1.27%. And, the universities got 27.08% of the overall spending on higher education by the state (Government of Punjab 2016–17). But, the Panjab University because of its different status,2 got ₹176 crore from the UGC during the corresponding period (Tribune 2017).

Clumsy Model of Governance

Universities started raising their own resources within the ambit of pre-reform period administrative bodies and governance councils. The financing profile of universities changed drastically with the enhanced role of private resources. Thereby, the publicly managed and financed organisations in existence for about half a century, speedily got transformed into a body corporate which justifiably stands as a publicly owned and administered entity but in practice is an organisation essentially financed by private sources. In a way, situation-driven, publicly managed but privately financed model starts absorbing more of the adverse features of both the public and private entities rather than the virtuous ones. The public–private partnership model evolved inherently and placed less reward on efficient utilisation of resources, individual productivity, and high performers. Even the apparently erroneous actions on the part of managers guided by limited period tenure-based interests are not matched with any sort of punitive counteractions by state systems. It is a fairly common practice for managers to promote self-interest at the cost of the institution through motivated recruitment of faculty and non-faculty positions; starting undesirable courses, departments and academic programmes; initiation of avoidable purchases, outsourcing, collaborations, and construction work, etc. The state apparatus’s active connivance in sharing the spoils leaves little space for timely or even delayed action to check malpractices, circumventing rules and norms. Moreover, it becomes easier to lay the blame for internal inefficiencies on other parties. In this case it is the users of services, that is, the students. Consequently, lobbying, pressure groups, and networks succeed in enmeshing the system in such a way where incomes are supposed to follow every type of expenditure. The interdependent system within organisations emerges when different administrative bodies circumvent set procedures and intentionally ignore them. This is upheld by successive departments because of a collusion among key decision-makers.

Consequently, expenditures continuously follow a higher trajectory to be matched by increase in incomes which generally acquires the form of higher fees and funds charged from students. The deepening financial crisis has brought up issues related to the dynamics of financial management by such organisations. The foremost question is, what went wrong with universities’ system of financing? Are governance structures within the university itself responsible for their present state of affairs? Teachers’ association from the Panjab University had demanded reforms in the governing bodies of the university both Senate and Syndicate to inject innovation and professional expertise in decision-making3 (Malik 2015). To tide over the recurring financial hardships, the university has also been contemplating changing its present status to that of either a central university, or a centrally funded university, or an institution of national importance (Banwait 2017a).

Rising Expenditures

University expenditures rose steadily as exogenous determination of dearness allowances, annual increments, and time-bound promotions generated a cumulative expenditure impact of around 20% per annum. This, in absolute amount, turns out to be substantial given the huge humanpower-based annual salary and pension bills. But, there does not exist an in-built politically and administratively acceptable mechanism to increase university incomes by a constant multiplier. Thus, unabated divergence between income and expenditure continued. It seems that in the contemporary situation financial problems of universities will be further compounded as the state apparatus is not inclined to build public institutions. This is evident in case of Punjab where the proportionate share of education budget (revenue account) in the overall budgetary expenditure and that of income experienced a decline for about the last decade and a half. The education budget constituted 17.99% of budgetary expenditure of the state during 1998–2001 (triennium average, henceforth TA), which came down to 16.17% during 2012–15 (TA). Similarly, during corresponding periods, education budget’s share in overall state income declined from 3.05% to 2.19% (MHRD 2016). The state has considerably slashed the 95% grants-in-aid policy which was applicable in case of schools and colleges since 1980s and has disturbed the financial equilibrium of a majority of institutions. Noticeably, the high cost-based entry barriers have made universities exclusionary.

During 2005–06, the section of students who did matriculation from schools located in rural areas was found to be very low (that is, 4.07%) in the universities of the state (Ghuman et al 2006). The politically charged campus environment provides little leeway for any experimentation related to fee structure further limiting the scope of cross-subsidisation. Universities under the pressure of market forces drifted away from the role and responsibilities expected from higher level academic institutions. Universities try to declare more courses as professional to fix higher fees and funds. For-profit private sector is getting entrenched within the various circuits of publicly owned and managed universities as cost and considerations have swayed key decisions.

Faulty humanpower planning blurs the boundaries among main services of an academic organisation, teaching and research, and ancillary services which led to questioning of adequacy of faculty to non-faculty ratios by fund providers4 (Banwait 2017b). The convoluted internal resource allocations translate into the demand for hefty resource generation for a much longer period. The over-riding objective of constituency nurturing by political leadership affects the employment matrix of public universities with disastrous expenditure fallouts. The situation turned quite grim as the ruling elite developed an interest in private education markets, both from the supply and demand side of the service delivery with no democratic pressure on them to improve the functioning of public suppliers of education. The ambit of state public universities increased further with adoption of the national programme of opening constituent colleges to enhance enrolment in higher education in selected educationally backward districts. Politically manoeuvred state apparatus avoids honouring the commitment of funds gathered publicly or otherwise with the universities at the time of assigning them new responsibilities.

The creation of special study and research chairs, opening special purpose colleges, administering scholarships, pursuing socially relevant programmes, and diversion of university lands without matching contributions are cases in point. Hence, the prolonged neglect and state apathy has put the affiliated state university in a situation of quandary. Universities have their own orientation, and governance mechanisms.5 But, the reality is that even the academic and administrative leadership of universities could not articulate and reinvent the university vision in an emphatic manner because of inner dissent and inertia. As a result, it would be difficult for financially injured universities with limited resources to act as: custodian of public trust, a force of societal change, and advancement with a capacity to reflect upon larger issues, grappling with reality and staying ahead of contemporary trends. So, the challenge for an affiliated state university is to stay firm as an institution committed to academics and research by not allowing its dilution as a large-scale coaching academy driven by monetary considerations where there is greater emphasis on classroom teaching, at the cost of academics and research by adopting money-minting courses popular in private institutes. The state should replenish both resource and leadership deficit of universities by putting dynamic persons in key positions who may bring desired administrative changes with their vision and actions to ensure wider inclusion in a qualitatively meaningful higher education.


1 Calculated from Budget Documents, Punjabi University, Patiala, 2016–17 and 2017–18.

2 The status of Panjab University is unique as it was created by a state act but located in the union territory of Chandigarh and has been declared as an interstate body corporate.

3 The highest decision-making body in Punjabi University and Guru Nanak Dev University is called Syndicate which consists of members nominated by the state government as well as seniority-based rotation from university and affiliated colleges. At Panjab University, it is the Senate whose members are elected by following the system of constituencies consisting of graduates to deans of faculties.

4 To resolve the financial crisis of Panjab University, the UGC insists upon bringing the teaching to non-teaching ratio at 1:1.1 which is contested by university administration and other non-teaching bodies as it is an affiliate university.

5 For example, all three affiliated universities of Punjab, besides sharing substantive commonalities also have specific agendas of their own. Punjabi University’s constitutional mandate is to promote Punjabi language, literature and culture; and cater to educationally backward rural areas. Guru Nanak Dev University, Amritsar focuses upon educational needs of border region. And, Panjab University, by carrying a historical legacy of about century, being situated in union territory of Chandigarh, with strong alumni base has a privileged position as it gets a good share of grants from UGC and caters to educationally better areas of the state and the Vice President of India acts as Chancellor.


Banwait, Ishrat S (2017a): “PU Panel Backs Out of Central Varsity Tag,” Tribune, 25 May,

— (2017b): “In Five Years, PU to Lay off 36% Non-Teaching Staff,” Tribune, 21 May, Chandigarh.

Ghuman, R S, Sukhwinder Singh and Jaswinder Singh Brar (2006): Rural Students in Universities of Punjab, Publication Bureau, Punjabi University, Patiala.

Government of Punjab (2016–17): Demand for Grants, Vol 1, Budget Documents, Department of Finance; Government of Punjab, Demand Number 5, Chandigarh, p 85.

Guru Nanak Dev University (2016): Syndicate Proceedings, Amritsar, 8 March, pp 2–3.

Malik, Meghna (2015): “PUTA Recommends Restructuring of PU Senate, Syndicate,” Indian Express, 16 October, Chandigarh.

MHRD (2016): Analysis of Budgetary Expenditure on Education, 2012–13 to 2014–15, Ministry of Human Resource Development, Government of India, New Delhi.

Tribune (2016): “GNDU Approves Budget Estimates,” Amritsar edition, 8 March, handigarh.

— (2017): “Fifteen Per Cent Yearly Hike Sought in Panjab Varsity Grant,” Chandigarh edition, 3 June, Chandigarh.

UGC (2015–16): Annual Report, University Grants Commission, New Delhi.


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