Myth: Government Universities Cost Less than Private Universities

Sep 24, 2017

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in At What Cost, Higher Education, School Education

This post explores the myth that Public Universities Cost Lower than Private Universities. I think the average cost per student per year of a public university is much more than that of a private university. Given below is a preliminary analysis. A more detailed analysis is required.
2005-2006 Analysis of Public sector universities indicates that:

HEC funding per student (2005-6) ~ Rs 75 k
Additional fees paid per year per student

Typical fee: ~ 25 k (For universities like KU)
Exorbitantly: ~ 150 k (IBA, NUST)

Total Average cost per year = 100k – 225k
Land acquisition and capital investment through PC-1s and other external funds would be extra and would amount to hundred of millions of rupees of funding per year to each public sector university.

Private Sector HEIs in 2005-06 in Karachi were typically costing a student less than Rs. 100 k. Mind you these universities took not a single penny from the tax money collected from the poor!

[2012]
In 2012, the average cost per student per year had climbed up for many public sector universities to over Rs. 200k. Whereas, many private sector universities in Karachi had fees around half. Remember, this would include operational costs as well as capital costs. Whereas the Rs.200k per student per year operational
costs of public sector universities does not include capital and development costs, which is an additional tab to be picked up by the poor taxpayers.

[2015-16]
According to the budget documents Rs 79.5 billion has also been earmarked for Higher Education Commission (HEC) including Rs 21.5 billion under the Public Sector Development Program (PSDP) and Rs 58 billion on account of current expenditure, showing an increase of 13 percent as compared to Rs 51 billion earmarked for 2015-16. [1]

The amount comes to around Rs 200k per student for on-campus students of government universities. Please note that this does not include the land grants and other allocations. This is directly from the federal budget.

The per student cost of a government university must also include the cost of all the officials of all the ministries responsible for making the government universities work. This cost should also include:

Cost of HEC personnel, administration, staff and operational costs responsible for calculating, approving, sanctioning, monitoring of any funding requirements for the government universities.
Cost of all the accreditation bodies for Engineering (PEC), Business (NBAEC), Computer Science etc. I think currently there are over ten such bodies and many others are in the process of formation. Their operational costs must be computed and distributed over the public universities. This function in US and other countries is typically performed by independent professional bodies with little or no tax money involved.
Cost of Ministry of Finance, AGPR, Planning Commission and other ministries responsible for disbursements of operational budgets, pensions, sanctioning and monitoring of PC-1s and their funds, decision making etc.
Cost of provincial departments and Governor secretariat’s responsible for sanctioning of leaves, appointments, projects planning etc.
Cost of all the capital investments through land allocations, grants, funds through other government agencies.
Cost of all the USAID and development funds loans and advances along with their interest payments

You add up all these costs and you will find out that the total cost per student per year, can come out to be at least ten times the per student cost of the private universities. Please note once again the private universities are not using the tax money of the poor people.

Now the justification of all these costs is on the basis of social equality and equal opportunity for the poor people of Pakistan. There are two major arguments:

There are many public universities whose fees are much more than several private universities. This should not be allowed. Example, IBA’s cost is Rs 150k per semester which is much more than most private sector universities.
Why can’t the government calculate all the money that it is spending on the public universities divide it by the number of poor students that it wants to support and give that as a hardship scholarship vouchers to the poor students. Let the poor students shop around for a university that would let them study with that voucher. I think this may be a more equitable distribution of money. It would then be channeled to the more efficient universities who can give the best quality for the least amount of money. This is how the market dynamics play out.

Consider this: Before HEC (2002-03) a government university like IBA Karachi’s fee was Rs 24k/sem, and new startup private universities were charging around Rs 40k/sem. After HEC’s advent today the government IBA fee is Rs 216k/semester, and new private universities are charging from Rs 4 lacs/semester to Rs 6lacs/semester. What is happening? This is the impact of not counting the costs. HEC effectively has become an institution that has raised the entry barriers and has reduced access to both the private universities and to the government universities. More on this in a later post.

References:

[1] Report

This write-up is an extended rehash of the ideas presented in a talk on “Five Major Myths of Higher Education” made at the CIO Conference, March 2009 at Sheraton, Karachi. See another link.
Presentation originally made at CIO Conference, March 2009 at Sheraton, Karachi.
The links and write-up below is an extended rehash of those thoughts:

Myth #1: Our backwardness is because we lag behind in Science and Technology
Myth #2: There is mushrooming of Higher Education Institutions in Pakistan
Myth #3: Impact Factor research measures real impact
Myth#4: Myth and Fiction of Government Universities Costing Less than Private Universities
Myth#5: Bigger infrastructure (land, building, equipment) means better education
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