Capitation fee

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Capitation fees are fees or payments of a uniform amount charged per-person. In medicine, capitation is one mechanism to pay physicians, where in a fixed payment remitted at regular intervals to a medical provider by a managed care organization for an enrolled patient. In education, it is an additional fee collected to cover expenses not included in other fees such as tuition.

Capitation fees in India[edit]

In the context of Indian law, a capitation fee refers to the collection of payment by educational bodies not advertised in the prospectus of the institution, usually in exchange for admission to the institution. The Prohibition of Unfair Practices in Technical Educational Institutions, Medical Institutions and Universities Bill, 2010 defines Capitation Fee as any amount (by whatever name called)—

  • Demanded or charged or collected, directly or indirectly, for, or, on

behalf of any institution, or paid by any person in consideration for admitting any person as student in such institution; and which is in excess of the fee payable towards tuition fee and other fees and other charges declared by any institution in its prospectus for admitting any person as student in such institution; or

  • Paid or demanded or charged or collected, by way of donation, for, or,

on behalf of any institution, or paid by any person in consideration for admitting any person as a student in such institution.[1]

A submission by counsel, F.S. Nariman, in the P.A. Inamdar case (August 2005) defines capitation fee as "something taken over and above what the institution needs by way of revenue and capital expenditure plus a reasonable surplus.").[2] It also goes by the name donations that are not of the voluntary type. This practice is widely prevalent in private colleges and universities in India, especially those that grant baccalaureate degrees in Engineering, IT and the sciences, for which the demand for admissions exceeds the supply.

In one aspect or point of view, the capitation fee comes as a surprise to the student at a time when the student may have forsaken admission deadlines at other institutions. Choosing not to pay may even lead to a form of extortion by withholding the degree. Parents often cough up money so that there is no ill bearing that affects their wards scores or standing.[3] The fee might not be uniformly applied. The donation money is often not accounted, its usage and allocation are mismanaged and not reported to Income Tax. In such cases of malpractice, students over pay for sub-standard education.

Capitation fees are generally seen as a main revenue generator in the private private institutions may charge, contending that admissions that cater to affordable sections of society somehow affects the overall number of students educated.[4][5] The government also controls the seat allocation, number and ratio of management, payment and free seats. This limits the institutions' ability to raise money through tuition, leaving institutions in need for money.[6] Collecting donations becomes a side effect of the government laws that disallow institutions from setting their fees. Some parents do genuinely donate to improve the infrastructure of their wards' college.

Arguments for and against capitation fees[edit]

The practice of charging capitation fees by various institutions and universities has been subjected to criticism on various grounds. It has been often referred as ‘killing of merit’. In its emphatic judgement in the Mohini Jain V/s State of Karnataka case, Supreme Court declared that charging of capitation fee was arbitrary, unfair and therefore in violation of the fundamental right to equality contained in article 14 of the Constitution. The Prohibition of Unfair Practices in Technical Educational Institutions, Medical Institutions and Universities Bill, 2010 recognized capitation fee as a cognizable offence. On the other hand, various private colleges have defended capitation fee on the ground that it avails institutions with funds to re-invest in the institution which can be utilized for imparting quality education. V Raghunathan, former professor, IIM-Ahmedabad said “For engineering colleges in most states, the permitted fee for unaided private colleges is in the vicinity of Rs 30,000 per student per annum. Given that even most kindergarten schools charge a higher fee in the cities, one wonders exactly how the private institutions are expected to provide high quality technical education for this fee”[7] However, institutions (business schools, engineering colleges, medical colleges) that take capitation fee also receive significant amount of funding from governmental funding agencies like AICTE, DST, UGC, various ministries under central government and state government. These funds support infrastructure ranging from faculty laptops, printers, lab facilities and trading rooms in business schools. Rationale for capitation fee is thus only an excuse.

Controversies regarding capitation fees[edit]

Various renowned and prestigious private schools and colleges across India have been found demanding capitation fee. It was found that sum of Rs 500,000 was allegedly paid by a student through a demand draft to Sri Venkateswara College of Engineering (SVCE), a private college located in Pennalur, Sriperumbudur near Chennai. The incident came into light through a surprise check drive initiated by the government in Tamil Nadu at 142 self-financing engineering colleges in the state.[8] Another scam exposed by a popular news channel Times Now suggested that Information and Broadcasting Minister for State Jagathrakshakan was allegedly associated with the Shree Balaji Medical College in malpractices in admissions. The minister later denied having associated with the college.[9] Jagathrakshakan said "I have never been the Chairman. Once I was a trustee. Before election I quit. I have absolutely no connection with the college or the trust.".[10] In February 2002, students had filed a case against Mercedes Benz International School, a prestigious school in Pune for allegedly collecting 'capitation fees' under the guise of a building donation fund.[11]

Legal implications[edit]

The Prohibition of Unfair Practices in Technical Educational Institutions, Medical Institutions and Universities Bill, 2010 was introduced as a strict measure to bring about the transparency in the educational system regarding the fee structures and other crucial issues. Under The Prohibition of Unfair Practices in Technical Educational Institutions, Medical Institutions and Universities Bill, 2010 charging or accepting capitation fee is considered as violation of Provision 6 of the same bill which prohibits any institution from demanding or accepting capitation fee, directly or indirectly. If found guilty under this offense, the institution will be liable to a penalty which may extend to fifty lakh rupees and maximum imprisonment for three years. The bill however has been criticized by various private institutions essentially for restricting the autonomy of the institution in such matters. J Philip, President, Xavier Institute of Management Education, Bangalore and former director, IIM – Bangalore said, “The Bill promises to be beneficial. But it also runs the risk of curbing the autonomy and the freedom of institutions and challenge dynamic functioning. Again, it could be misused by students or anyone trying to settle scores.” [12] Media reports indicate that black money in higher education sector in India is generating more than 48,000 crores. The Special Investigation Team (SIT) probing into black money practices in India has started their probe into this area, which has so far remained outside the ambit of SIT.[13]

Suggestions to curb the practice of capitation fee[edit]

Concerns have been raised on how capitation fee has been charged in the name of donations.[14] In August 2014, the Supreme Court appointed Mr Salman Khurshid, former Union Law Minister, as an amicus curiae, and asked him to come out with suggestions and methodologies to end this practice.[15]

In addition to stringent legal actions, other practices that government can adopt to curb this practice include:[16]

(1) Audited financial statements of educational institutions, and the 'charitable trusts' that owns these institutions, need to be released in the website of these institutions and also in the public domain, on an annual basis. (2) Funding organisations like DST, UGC, AICTE, Ministry of Education, Other ministries under central government and state government should stop funding research projects and programmes in such institutes.

Articles in one of the leading international medical journal, while discussing about the capitation fee practices in medical colleges in India, suggested that those who complete their courses from capitation fee taking colleges should not be allowed for postings abroad.[17][18]


  1. ^ The Prohibition of Unfair Practices in Technical Educational Institutions, Medical Educational Institutions and Universities Act, 2010. ,Bill No. 56 of 2010 Lok Sabha,[1]
  2. ^ The definition of capitation fee in the context of India, Education in India Blog, June 7, 2005,[2]
  3. ^ Capitation fee: ‘early bird' phenomenon continues , The Hindu, May 23, 2011, [3]
  4. ^ UGC to decide fee structure of private deemed universities, Indian Education Review, 14 Mar 2011,[4]
  5. ^ Private Universities in Himachal to be regulated by law, Indian Education Review, Dec 7 2010, [5]
  6. ^ Supreme Court's double whammy for elite schools, EducationWorld Article 130 Issue 6. June 2004,[6], [7]
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