State Government’s Role in Higher Education: Policies, Funding, and Challenges

India’s higher education system is one of the largest in the world, with over 1,000 universities and more than 40,000 colleges spread across the country. But here’s a fact that often surprises people: approximately 70% of these universities operate under State Acts, and around 94% of all students are enrolled in state or private institutions. This means the quality, access, and future of higher education for the vast majority of Indian students is shaped not in New Delhi, but in state capitals. So how do state governments manage this enormous responsibility? And what are the gaps that still need urgent attention?

The constitutional basis: how states got authority over higher education 🔗

To understand the state’s role in higher education, you need to go back to the Constitution of India. Before 1976, education as a whole was a State Subject, and the Central Government played only an advisory role. States had near-complete authority to legislate on universities and colleges within their territory.

The Forty-Second Amendment of 1976 changed this significantly by moving education to the Concurrent List, making it a shared responsibility between the Centre and the states. However, this did not strip states of their core authority over higher education. States continue to establish and regulate universities through their own legislative assemblies, appoint key academic administrators, affiliate colleges, and frame academic policies within their jurisdiction. In effect, state governments remain the primary architects of higher education for the majority of India’s student population.

It is worth noting that while Entry 25 of the Concurrent List covers general higher education, Entry 66 of the Union List reserves for the Central Government the sole responsibility to coordinate and determine standards in institutions of higher education and research. This creates an important division: states manage and run their universities, but the Centre sets the quality benchmarks through bodies like the University Grants Commission (UGC) and the All India Council for Technical Education (AICTE).

How state universities are funded 🔗

Funding is where the complexity – and the inequality – of India’s higher education system becomes most visible. State universities depend on a combination of sources: their own state budget allocations, supplementary grants from the UGC, and devolution from the Finance Commission. Each of these works differently, and together they create a patchwork system that leaves many institutions financially stressed.

State budget allocations 🔗

The primary source of funds for state universities is the state government’s own budget. State universities depend largely on their respective state governments for operational funds. This means that the financial health of a state directly determines the quality of higher education it can offer. A state with a strong revenue base can invest more in faculty salaries, infrastructure, and research, while fiscally constrained states often struggle to even meet basic operational expenses. The result is a stark disparity across regions – universities in Maharashtra or Tamil Nadu may be far better resourced than those in Bihar or Jharkhand, for instance.

UGC grants for state universities 🔗

While state budgets form the backbone of funding, the University Grants Commission (UGC), a statutory body established under the UGC Act of 1956, also provides supplementary development grants to eligible state universities. However, this assistance is not automatic. For state universities established after June 1972, UGC assistance is contingent on meeting fitness criteria under Section 12(B) of the UGC Act, which means newer state universities may wait years before qualifying for central grants. The UGC evaluates institutions based on past performance, infrastructure, and development plans – a process that, while designed to ensure accountability, can delay much-needed funding to emerging institutions.

There are three levels of educational planning and management in India: the Central Government, the State Government, and the district level. At the higher education level, state governments share responsibilities with the UGC and the Union Government – but in practice, the financial burden falls disproportionately on the states.

The Finance Commission’s role 🔗

The Finance Commission, a constitutional body that recommends the distribution of central taxes between the Centre and states, also plays a role in shaping higher education finances. The 15th Finance Commission (2021-26) recommended sector-specific grants to states covering eight key areas, with higher education explicitly included. A portion of these grants is performance-linked, meaning states must demonstrate measurable outcomes to access the full amount. While this incentivises better governance, it can also disadvantage states that lack the administrative capacity to document and report effectively.

The erstwhile Planning Commission – replaced by NITI Aayog in 2015 – used to play a central role in channelling funds for higher education through Five Year Plans. Development grants for central universities were finalised through detailed discussions between the UGC and the Planning Commission before final allocation. While NITI Aayog has taken on an advisory rather than a fund-disbursing role, it continues to shape higher education policy through reports and recommendations. A recent NITI Aayog policy brief on state public universities highlighted that these institutions are critical to human capital development, accounting for nearly 80% of India’s higher education, and made nearly 80 policy recommendations for their improvement.

Coordination with central bodies: more complex than it looks 🔗

The relationship between state governments and central regulatory bodies is not always smooth. On paper, the system is designed as a cooperative federalism model – states manage, the Centre regulates and supplements. In practice, frictions arise regularly.

The UGC, for instance, sets norms for curriculum, faculty qualifications, examination standards, and even fee structures. In India, education is included in the Concurrent List, which means both the Centre and states can enact laws on it. In addition, the Centre can determine standards for higher educational institutions while states can incorporate, regulate, and wind up universities. This dual authority has sometimes led to overlapping jurisdictions and conflicting directives that universities must navigate.

The question of who coordinates education policy across Centre and states is also evolving. The Central Advisory Board of Education (CABE) is meant to serve this function, but its meetings are infrequent and its recommendations are not binding. The proposed Higher Education Commission of India (HECI) under the National Education Policy (NEP) 2020 seeks to consolidate regulation, accreditation, and standard-setting under one body – replacing the UGC – but concerns have been raised about whether this will further centralise power at the expense of state autonomy.

Issues and challenges: where the system falls short 🔗

Despite the constitutional framework and multiple funding channels, state higher education faces persistent structural challenges that have resisted easy reform.

Chronic underfunding and resource disparities 🔗

With 495 state public universities (SPUs) and more than 46,000 affiliated institutions serving 81% of total student enrolment, the financial demands are immense. Yet state budgets for higher education are often the first to face cuts during fiscal stress. Reduced financing to universities directly affects standards of education and research. Many state universities struggle with outdated infrastructure, insufficient library resources, and an inability to attract and retain quality faculty – all consequences of underfunding.

The disparity between central and state institutions is stark. Central universities and premier institutions like IITs and IIMs receive stable, often generous, central funding. State universities, which educate the overwhelming majority of students, operate on far tighter budgets. NITI Aayog’s policy brief recommends raising government investment in higher education to 6% of GDP, as suggested by NEP 2020, to bridge this gap – a target India is far from meeting today.

Political interference in university governance 🔗

One of the most damaging challenges facing state universities is political interference. Political influences often affect the allocation of resources, the appointment of Vice-Chancellors, and the overall governance of universities – and this is a problem that operates at both the state and central levels. At the state level, the appointment of Vice-Chancellors is frequently influenced by political considerations rather than academic merit. Governing bodies of universities are sometimes staffed with political appointees, and decisions about new departments, courses, or campuses are occasionally driven by electoral logic rather than educational need.

The Radhakrishnan Commission, as far back as 1948, had recommended that universities should be autonomous institutions, free from political interference but accountable to the public. Decades later, this vision remains only partially realised. In fact, recent debates around UGC Regulations 2025 have raised concerns that proposed changes to Vice-Chancellor appointment processes may insert central government preferences into university leadership – a concern that affects the federal balance between Centre and states as well.

Administrative inefficiency 🔗

Beyond politics, administrative inefficiency is a systemic problem. Many state universities oversee hundreds of affiliated colleges spread across vast geographies, but lack the administrative machinery to monitor them effectively. Examination delays, slow grievance redressal, and sluggish implementation of curriculum reforms are common complaints. The National Knowledge Commission (2009) noted that over-regulation in the UGC system neither preserves autonomy nor promotes accountability – a critique that applies equally to state-level governance structures.

Reforms on the horizon 🔗

The picture is not entirely grim. Several reform initiatives signal a more structured approach to state higher education in recent years.

The PM-USHA (Pradhan Mantri Uchchatar Shiksha Abhiyan) scheme directly targets state universities and colleges. States are required to submit Higher Education State Perspective Plans (HESPPs) to access PM-USHA funds, encouraging systematic planning at the state level. The scheme emphasises learning outcomes, digital infrastructure, and NAAC accreditation – pushing state institutions toward measurable quality benchmarks.

NEP 2020 has also set an ambitious target of increasing the Gross Enrolment Ratio in higher education to 50% by 2035, from the current figure of around 28%. Achieving this will require state universities to significantly expand both capacity and quality. The policy also recommends strengthening State Higher Education Councils (SHECs) as planning and monitoring bodies, which could improve coordination between state governments and their universities.

On the governance front, NITI Aayog has recommended providing greater autonomy to state public universities in faculty hiring, curriculum design, and financial management – along with the creation of model state acts to simplify outdated regulations. Promoting public-private partnerships and leveraging corporate social responsibility funds for university infrastructure are also part of the reform agenda.

These are meaningful steps, but their impact depends entirely on implementation – and implementation has historically been the weakest link in India’s education reform story. The gap between policy aspiration and ground reality in state universities remains wide, and closing it will require consistent political will, administrative capacity, and adequate public investment.

What do you think? Given that state public universities educate over 80% of India’s higher education students, should they receive a larger and more guaranteed share of central education funding – separate from competitive grants? And how can states genuinely insulate university appointments and governance from political pressure without creating new accountability gaps?

References

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