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Capitation fee


Capitation fee refers to an illegal transaction whereby an organisation that provides (or supposedly provides) educational services collects a fee that is more than what is approved by regulatory norms.

In the context of Indian law, a capitation fee refers to the collection of payment by educational bodies not included 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 it as any amount that

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.") Other definitions for capitation fee also include "any amount, by whatever name called, paid or collected directly or indirectly in excess of the fee prescribed...", "any amount by whatever name called whether in cash or in kind paid or collected or received directly or indirectly in addition to the fees determined" and "any amount, by whatever name called, whether in cash or kind, in excess of the prescribed or, as the case may be, approved, rates of fees..."

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, though a number of technical educations has been closing down in recent years and many seats go vacant. Ample evidence to the collection of capitation fee exist.

Capitation fee has been one of the major contributors to corruption in education and society. Those who complete their course by paying capitation fee are looking for a "return on investment". This attempt to recover the investment fuel unethical practices. Capitation fee has been considered to be one of the reason for the exorbitant hike in healthcare costs and deteriorating medical standards.

Capitation fee comes as a surprise to the student when the student may have forsaken admission deadlines at other institutions. Choosing not to pay additional fee may even lead to a form of extortion, by withholding the degree from students. Parents often pay so that there is no ill bearing that affects their wards scores or standing.

The fee might not be uniformly applied. The donation money is often not accounted, and its usage and allocation are mismanaged and not reported to income tax. In such cases of malpractice, students overpay for substandard education.

Students are also misguided. Some institutions add the capitation fee along with the fee approved by regulatory norms. This combined fee is projected as the actual fee to the students.

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


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