{"id":241167,"date":"2015-05-28T16:52:15","date_gmt":"2015-05-28T11:22:15","guid":{"rendered":"http:\/\/www.tehelka.com\/?p=241167"},"modified":"2015-05-28T16:52:15","modified_gmt":"2015-05-28T11:22:15","slug":"centres-of-earning","status":"publish","type":"post","link":"https:\/\/tehelka.com\/centres-of-earning\/","title":{"rendered":"Centres of Earning"},"content":{"rendered":"

\"Photos:<\/a>
Photos: Sahil Ansari<\/em><\/figcaption><\/figure>
\nMost are self-contained, self-sustained and hugely profitable educational universes. They charge a bomb from students and offer them 100 percent placement in their sister concerns. They ask the alumni, who are employed with them at a pittance, to teach the fresh batches. They grab huge incentives, like cheap real estate, from the state regimes. In the end, they earn profit margins of 100-500 percent.
\nShruti (name changed) paid almost Rs 5 lakh for a bachelor\u2019s in management. She was employed by the institute\u2019s group firm at a salary of Rs 10,000 a month. After a year, she didn\u2019t get a raise, but was asked to teach fresh batches and paid an additional amount. Students were happy, and so was the institute, which aggressively advertised 100 percent placement record to woo new students each year.
\nEven when the higher education colleges don\u2019t have captive employment opportunities, their profits are huge. Take the case of Gautam, who paid around Rs 5 lakh, or Rs 1.25 lakh a year, for a four-year fashion course. There are 80 students in his batch and another 200 students in the three other courses. If there are similar number of students in each year of the four-year courses, the college earns a whopping Rs 14 crore (280x4x1.25) a year. The minimum profit: Rs 5-10 crore each year.
\nIt is hardly surprising that the private sector has all but taken over the higher education segment, which forms a sizeable component of the over $65 billion education industry. According to a 2015 report by a law firm, Nishith Desai Associates, almost 65 percent of higher education institutions are in the private hands and they cater to 50 percent share of the students\u2019 enrolment every year. \u201cThe number of unaided (by governments) higher education institutions is on the rise,\u201d added the report.
\nDemand and Supply<\/strong><\/span>
\nThe entry of private players in higher education is a result of the pent-up demand among students. India\u2019s Gross Enrolment Ratio (GER) \u2014 the percentage of students who opt for higher education \u2014 is a measly 15-18 percent, or much lower than China\u2019s 26 percent, Brazil\u2019s 36 percent and the world average of 23 percent. Still, there are millions of students who enrol each year. A rough calculation by a website, www.dreducation.com, put this figure at over 20 million in 2012-13 and 26.5 million in 2014-15.
\nAnother indicator of the demand for higher education is the number of Indian students studying abroad. A couple of years ago, Forbes<\/em> said that over 4.6 lakh students go abroad to study every year. The figure would have gone up this year. Of them, over 22 percent choose American colleges, a similar percentage go to Australia and nearly 10 percent choose universities in Britain.<\/p>\n

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Various regulators in India insist on common entrance exams, either at the state or all-India level, for admissions in professional courses such as engineering, medical and management, offered by legally- approved colleges, universities and institutes. Students who fail in these tests of merit have to pay huge sums to join unapproved institutes, or approved ones that have their own entrance exams.
\nA study by PricewaterhouseCoopers (PwC), along with the Confederation of Indian Industry (CII), estimated that there were over 33,650 colleges and universities that provided higher education. While the compounded annual growth rate over the past few years was almost 12 percent for colleges, the figure was over 10 percent for universities. The report said that \u201cthe number of institutes has nearly doubled\u201d and this indicated that the sector \u201chas attracted investments from both the public and private sectors\u201d.
\nHigher education is likely to soon attract a larger number of private players, including foreign universities that have shown interest in the sector. This will be driven by the higher demand as well as policy and regulatory initiatives. In the 12th Five Year Plan, which will now be overseen by the NITI\u00a0Aayog, the overarching goals include \u201cexpansion, inclusion and excellence with equity and quality\u201d.
\nSeveral higher education Bills may be introduced in Parliament by NDA-2. The most critical, Foreign Educational Institutions (Regulation of Entry and Operations) Bill, will ease the entry of foreign players, either independently or in collaboration with Indian partners. At present, the University Grants Commission (UGC) allows restricted tie-ups between foreigners and Indian educational institutes.
\nTo Profit or Not<\/strong><\/span>
\nEducation, including higher education, has always been regarded as a charitable cause and not-for-profit activity. As the PWC\u00a0study said, \u201cCurrently, only registered societies or trusts and, in certain cases, not-for-profit companies\u2026 are allowed to establish formal educational institutes.\u201d This is the prime reason that the government gave tax exemptions to such institutes.
\nHowever, the not-for-profit position makes it difficult for recognised private players to recover their capital expenditure, forget about earning returns on it. The issue is complicated by the tangled mechanism of regulation, with multiple regulators at the central and state levels governing admission procedure, fees, the number of available seats, curriculum and operational standards in institutes that are approved by them.
\nThe net result: many of the approved and recognised institutes have found innovative and partially legal ways to siphon off profits from their trusts and societies. In addition, there is a huge boom in the unregulated market, especially in higher education. Although such institutes, which are not approved by any of the regulators, cannot award degrees and certificates, they can be incorporated as a company, earn huge profits by hiking their fees, and distribute the profits among the owners and other shareholders.
\nIndian and foreign private players, therefore, have clamoured for changes in the laws to allow for-profit firms to enter the sector. Experts have advocated the introduction of PPP\u00a0(Public-Private Partnership) models. These can work in various ways: a private player can provide the infrastructure and the government can run the institute and pay a specific annual amount to the former; both the infrastructure and management of the institute can be outsourced to the private player; or the government and private player can share the infrastructure costs, while the latter runs the institute.
\nIn Foreigners We Don\u2019t Believe<\/strong><\/span>
\nGiven the not-for-profit status of the education sector, foreigners have chosen to enter the Indian market through \u201ctwinning arrangements\u201d. In such deals, students complete a part of the course in an Indian institute and the rest in a partnering foreign college. \u201cBesides students exchange, twinning models also facilitate foreign institutes to enter into a service agreement with domestic institutes for providing expertise and services like faculty exchange, curriculum, foreign affiliations, etc. Foreign institutes can also provide distant learning courses through elearning,\u201d said the Nishith Desai report.<\/p>\n

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However, the UGC\u00a0has laid down strict guidelines to regulate collaborations between Indian and foreign institutes. Only recognised and accredited Indian and foreign colleges can join hands and the Indian partner \u201cshould have an experience of at least five years offering educational programmes at the level of degree and post-graduate diplomas\u201d. The idea behind the norms is to \u201censure that the quality of education is not compromised\u201d, even as foreigners are encouraged to \u201cstrengthen the higher education space\u201d.
\nA new for-profit route, through LLPs (Limited Liability Partnerships), has opened up for the foreign institutes to enter the unregulated higher education market. In 2011, the government allowed foreign direct investment (FDI) in LLPs, but only if they entered sectors where FDI\u00a0was allowed automatically without other sector-related conditions. \u201cThis liberalisation has opened the doors for foreign investors\u2026 to benefit from this flexible and tax-efficient new form of entity,\u201d said the PwC\u00a0study.
\nAll eyes are set on the government\u2019s initiative to allow easier and expansive entry of foreign institutes. This may either be through a new Bill in Parliament or changes in executive rules. In 2013, the ministry of human resource development finalised rules that would \u201cpermit foreign universities to set up campuses in India and issue foreign degrees without having to collaborate with domestic educational institution or education service providers, as is the case currently\u201d, said the Nishith Desai report. The NDA-2 can clear these rules and avoid new legislation.
\nClearly, the higher education sector offers attractive and profitable opportunities for the private sector. \u201cA number of studies and reports indicate that strong returns could be expected from this sector. With the demographic dividend in India at its peak\u2026 what is present before the investors is a timely opportunity,\u201d said the Nishith Desai report. It added that despite the constraints, \u201cwith foresight, strategic planning\u2026 investors interested in investing in education can\u2026 generate favourable returns\u201d.
\nHowever, the current regulations and restrictions have allowed the entry of fraudulent institutes, which charge huge fees and offer low-quality education. There may be a need to change the not-for-profit status of colleges to for-profit, yet allow the regulators to specify the fees that can be charged by the institutes. This will informally cap the profits and still allow the private entrepreneurs to distribute them. In addition, the entry of foreign colleges will force the Indian institutes to improve their operations. Only then will non-tainted money flood the sector in a short period. Those in support of no-detention have argued that there is a need for wider debate rather than hastily discarding the legal provisions which have emerged from long drawn processes in policy discourse. Unless we make an effort to engage in those debates, we would be further hampering the already languishing situation of education in the country.
\neditor@tehelka.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Most private institutes that provide higher education are interested in raking in the moolah, and not in teaching and learning, says Alam Srinivas<\/p>\n","protected":false},"author":78,"featured_media":241180,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[56],"tags":[9342,9343,9344,9345,3951,6406],"_links":{"self":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/241167"}],"collection":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/users\/78"}],"replies":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/comments?post=241167"}],"version-history":[{"count":0,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/241167\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/"}],"wp:attachment":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/media?parent=241167"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/categories?post=241167"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/tags?post=241167"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}