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How the RTE can make the Budget performing Schools extinct

Budget Private Schools, Finances & Budgets, Licenses and Regulations, Right to Education

The Right to Education Act (RTE) which came to effect on the 1st of April 2010 provides a rich laboratory for those wishing to study the unintended consequences of affirmative action in social choice literature. The government has promised free and compulsory education to all children between the age of 6 and 14.

The public education system suffers from systemic problems which breed a culture of low learning outcomes. This is why many parents have opted for private provisions for education at a low and affordable cost. In light of this choice by parents we have seen a mushrooming of budget private schools all over the country. However, the RTE changes the equation considerably. The provisions for recognition of private schools under Section 19 of the Act imposes severe infrastructural regulations on private schools and also places market distorting price floors on teacher’s salaries. Standard economic theory would predict that such regulations adversely impact efficiency and wages thus decided, do not reflect market clearing levels.

These provisions work to destroy the comparative advantage of budget private schools which historically lay in their capacity to efficiently utilize locally available resources and cheap human capital to provide quality education to thousands of children. The RTE takes away the cost advantage these schools maintained by hiring dedicated teachers from the local community and using effective on the job training and monitoring.

This blog uses a research study conducted in Delhi by me for The Centre for Civil Society to estimate the cost incurred by budget private schools in complying with the RTE norms which has two components. First, the capital expenditure component which includes specific dimensions of classrooms, playgrounds, library, separate toilets for boys and girls and even specifies the number of these toilets based on the number of students enrolled. Second, the variable monthly component which comprises of monthly variable expenditure based on increases in teacher’s salary and an increase in the number of teachers hired as a result of the stipulated teacher-pupil ratio. In order to break even on his investment the owner will be forced to pass the burden of this expenditure to students by increasing the fee charged. This concept is used to estimate the increase in the per-child fee if these improvements were to be undertaken.

The data from the aforementioned research is used to assess the consequences of these norms on the budget performing schools which aims to provide access to education for all children.

The key findings of the study are summarised below

• The average increase in fee charged if RTE norms were followed in the Chauhan Bangar (urban), Karawal Nagar (peri-urban) and Libaspur (rural) areas of Delhi surveyed was 394.17%, 533.62% and 352.49% respectively, using the most conservative estimates costs based on government determined circle rates for property and construction costs. The corresponding figures at market rates were 775.95%, 1044.06% and 2458.79% respectively.
• The change in absolute terms corresponds to fee increases from 370 INR, 302 INR and 295 INR in the three areas is INR 1458.43, INR 1611.53 and INR 1039.85 respectively using the most conservative estimates. The corresponding figures at market rates are 2871.02 INR, 3153.06 INR and 7253.43 INR respectively.
• The monthly variable component of the expenditure namely teacher’s salary according to the RTE regulations, alone accounted for increase for around 100% of the present fee in all three areas.
• Hardly any school owner could undertake these improvements without financial help as their capital base is very thin and they do not have access to bank loans and other sources of finance.
• Parents who send their children to school often struggle to pay the school fee thus any substantial increase in the fee would drive these parents outside the ambit of quality education.
• However, it must be mentioned that in most cases it is physically impossible to undertake the improvements stipulated by the RTE as there is no open space available for school playgrounds and adequately sized classrooms. All area in the neighbourhood has been divided and sub-divided into plots for housing purposes.

These results should be viewed in conjunction with the fact that the average monthly fee charged in the urban, peri-urban and rural areas under study was 370 INR, 302 INR and 295 INR respectively. However, if these schools were to undertake RTE improvements and pass on the burden to the students, the fees are likely to inflate by many times their present levels as already mentioned. This would deny access to most poor parents who can presently afford private education. In such a scenario when a school undertakes these improvements not only does it cease to be a budget private school, it also ceases to cater to the poorest of the poor. A direct outcome of the same would be to push these poor people outside the ambit of quality education or to force them to turn towards public schools. However, these parents had already rejected the option of public schools as they view these as adding little value to their child’s development and learning. Thus it is more probable that many such parents opt out of the education system as a consequence as they cannot (any further) afford the education they value (private schools) and they do not value the education they can afford (government schools)

The functioning of budget private schools comes as close to a pure market transaction as possible. However, the RTE distorts this transaction. As with several other government interventions, it creates dead-weight loses, produces by-products which people do not value (fancy playgrounds and highly paid teachers) and more importantly pushes some consumers out of the market by artificially raising the price of the product (fee) above the market clearing levels. This framework summarises the case of RTE infrastructure norms and its counterproductive impact of reducing access to education for thousands of poor parents. Thus in reality the RTE denies the poor citizens of this country to chose for their children the education they have reason to value.

At a recently held workshop by RTE forum in Delhi, it was quoted that only 5% of all the schools in India (Govt. + pvt.) follow all the RTE norms. All the infrastructure regulations are only applicable on the private unaided schools. As you are reading this blog, more than 20% government schools in Hyderabad are being run in rented building with no proper rooms, let alone the playground.

On one hand these regulations are not applicable on government schools, and children in government schools are still studying in rented buildings and on the other hand, private schools are burdened with these unfounded regulations. It might be a political masterstroke to eradicate the greatest competition to the government schools leaving parents with no alternative. Whatever happened to the doctrine of increasing competition and choice!!

Kartik Misra, School Choice Campaign, 18 April 2012

1 Comment

One Response to “How the RTE can make the Budget performing Schools extinct”

  1. Jayati Chatterjee
    4 May 2012 at 21:32

    EDUCATION FOR. ALL, How good it sounds. Our Govt is trying to make it work by introducing the
    RTE Act, where the schools are supposed to keep 25% of the seats for the EWS students.
    And for each student Govt. is paying a certain sum of money to the school for the stationary, books and uniforms.
    The principal is supposed to give the money to the guardians of these students, or they should provide the essentials.
    Now comes the story of a very renowned Govt aided girls school. One of the guardians approached the principal.
    He was outright refused that no such money has been received. Then the gentleman wrote to the
    Directorate of education. After two or three reminders action was taken and the father was called to the
    Principals office and money was handed over to him.
    Now my question is there were many others like her but how many parents are aware of these things.
    The person sitting on the highest chair of an educational institution can be involved in such type of corruption,
    Isn’t it hard to believe.
    How much can one make by this type of action? Where are we leading? In an educational institution
    this type of leached type corruption what can one say.
    I’m sure there are other schools also who are having the same practice. Is there any one to check these actions.

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