Where cess has gone

Imposing the education cess to “fulfil the commitment of the Government to provide and finance universal quality basic education” was one of the very first actions of the UPA government. The education cess fetched the government Rs 5,010 crore in 2004-05. The expenditure on primary education in the Union Budget went up from Rs 5,450 crore in 2003-04 to Rs 8,000 crore in 2004-05. In other words, the spending on primary education increased by Rs 2,550 crore. In Budget 2005-06, the education cess is estimated to fetch the central government Rs 6,975 crore. The HRD wants it to be spent through a “Prarambhik Shiksha Kosh”, the Planning Commission reportedly wants to spend it on secondary education and literacy and the finance ministry wants to save on budgetary resources to HRD unless it first uses up the cess. Now, a Group of Ministers (GoM) is expected to resolve these issues.

The question the government must be called upon to answer in the forthcoming Parliament session is: how could the government collect the cess and impose administrative costs on taxpayers without being crystal clear on how it was going to spend the money? Should matters about how to use the cess not have been settled, agencies created and proper mechanisms put in place before the cess was imposed?

The only successful case of a cess in India has been the fuel cess which is more in the nature of a user charge paid by those who drive vehicles on roads, where the bulk of the cess goes to specific agencies such as the National Highway Authority of India. It works because the use of the cess has been clearly defined. The Congress-led government cannot, however, prove that the education cess has been used properly considering that it has only now begun to talk about how to use it. It should be asked to first put in place a transparent and effective mechanism for using the cess before it reintroduces it. Until this is done, it should scrap the cess.