Education Cess and Petrol Cess – where’s the money going?
All of us need to be alert to the fact that the cess being collected from us might not be being properly utilized. We pay two kinds of cess to the government…the petrol cess (Rs 2/- levied on very litre of petrol or high speed diesel (HSD) diesel from 1998-99) for the development and maintenance of roads/highways and the education cess (Rs 3/- levied on all central government taxes, such as corporate tax, income-tax, service tax, custom duty and excise from 2004-05) to help the education sector grow.
That’s our money…but do we know where it is going? Lets take the petrol cess first.
Petrol Cess – Lack of transparency
For some strange reason the government has refused to divulge how much money was collected and how it is being used and. The Daily Pioneer was forced to conduct an investigation to find it out. They did their job admirably by multiplying the sales of petrol and HSD oil (since 1998-99) with cess values of successive years and got the figure of Rs 84,251.7738 crore. These details were published in the 5th May issue of The Pioneer (link not available). But the lack of transparency on the government’s part is not the only problem…what’s worse is that the money is not being used efficiently.
The government is supposed to allocate the money (collected in a Central Road Fund) to various states and union territories for highway development and maintenance…but a quarter of the fund has not even been allocated and this unused money amounts to about Rs 63,790.76 crore. One has to wonder if the money is still there or has been diverted? The government isn’t talking. A quote from the Pioneer:
…Clearly, the Government is determined to stonewall all queries about how much money it has extorted from the public, leave alone telling us how that money has been spent. The Finance Ministry won’t even tell Parliament about it!
Wait, there’s worse news. Just because the central government has allocated the funds it doesn’t mean that the states are using them! Allocated funds lie unused too. An Indian express article got hold of statistics which showed that from 2004-05 to 2006-07, the amount that each state left unused ranged from 28 per cent to 3 per cent, with the southern states utilizing the funds in a better way. Even the Union territories did badly here, using only 38 percent of the grant of Rs 150 lakh from the Central Road fund.
So what’s up with the states? Apparently, development work is not moving fast enough, the states are not being able to get projects going and not able to get them completed on time. Government officials have admitted that states “are not taking a pro-active stand on the issue.” So now you know why that flyover near your house is taking so long to build…
Education Cess – apathy galore
This cess is as high as 3 percent today. Initially it was just 2 percent but an an additional 1 percent was levied in 2007, ostensibly to help secondary education.
Right from the start there was a stink surrounding the education cess. A 2004 TOI article says:
Six months after the Centre introduced the cess to fund the primary education sector, there is utter confusion on how it is spent…
And can you believe it, even though Rs 2,273 crore was collected in first six months, the state education departments had no access to the funds and “no specific direction” was given to them about the funds!! Shocking isn’t it when state schools sorely lack everything from toilets to blackboards?
So has the situation improved now, 3-4 years down the line? It’s the same story of lack of transparency like in the case of petrol cess. Although we know that Rs 10,300 crore was collected in the last year, no one is quite sure of the total amout collected since the cess was introduced. This Economic Times article says:
…the total amount of cess collected seems to vary depending on where one gets the information from.
Ministers give out one figure, the Controller General of Accounts another and the human resource development ministry say something else. If you go by what the HRD Ministery says then the figures are:
2004-05 – Rs 4,318.51 crore
2005-06 – Rs 7,637.75 crore
2006-07 (the HRD ministry only had figures till February!!) – Rs 6,833 crore.
There is another aspect to this issue. The government is using the education cess to fund education projects instead of using its own money. The truth is that the government is not supposed to collect any education cess at all since setting up of educational institutions is a constitutional obligation – the government should finance it from taxes collected. But okay, let’s give the government the benefit of the doubt and imagine for a moment that it is poor and needs more money to beef up our weak educational infrastructure, weakened due to years of neglect. Shouldn’t we take this to assume that the education cess is an extra, over and above the existing expenditure of the government on education?
Nope. Its disheartening to know that the government’s contribution to education expenditure (minus the cess which is our money) has decreased. This means that government is diverting the money it was earlier spending on education to something else! Sure, there is nothing illegal in that but it goes against the very spirit of the cess.
We all want India to grow and develop and are ready to pitch in. But it’s terrible that the government is not acting responsibly. Unless it is more transparent in its functioning and clears the doubt of the citizens we will always suspect that we are being taken for a ride.
Related Reading: India Budget 2008 Highlights
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(Both photos are by me and are copyrighted)