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Private Gains, Public Lessons

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For those who are increasingly concerned about the crisis in higher education, this may be good news. In a discussion paper, the Planning Commission is suggesting that private investment be allowed on a for-profit basis.

The suggestion is likely to spark a storm, but will also initiate debate. There is not enough public funding to create new high quality universities in India. Existing ones simply cannot meet demand: candidates number several times the seats available, be it for engineering or architecture, even degrees in arts, commerce and sciences.

In recent years, several private institutes have emerged, especially in engineering, ostensibly not for profit, operating through trusts or societies. But often while the institution does not make a profit, sister concerns seem to earn remarkable returns. One explanation: profits generated through the institution is diverted through sister concerns, while maintaining the facade of the not-for-profit.

"Although the preponderance of global private higher education is legally non-profit, much of it is functionally for-profit," says a senior Planning Commission official. "Financial gains, while not formally distributed to shareholders, somehow pass to owners and managers, instead of being reinvested in the institution".

Secondly, these institutes lure candidates with promises of job placements, and charge very high fees; but the quality of education is often sub-standard; at the end of the course, the candidate is not much better educated, has no job, and is a lakh or two poorer. Third, a large number of children, who can afford it, leave the country and study overseas right after high school. The brain drain is now occurring at the graduate level rather than at the post-graduate level.

Will attract private investments to the sector

Make finances of education institutes more transparent

Private players can secure funding from banks
Create institutes for the elite, with high fees

Could draw not-so-established private players out to make a quick buck

Policy makers believe that perhaps it is better to move to a model where things are transparent and direct by making higher education institutes for-profit. That will attract lots more private investment in education.

The US allows for profit colleges and universities; 9-10 per cent of the student population is enrolled in them. Brazil and China have also recently allowed for-profit education.

Many experts worry that while many institutions will spring up, they will cater only to the elite and privileged classes, but exclude access to a large percentage of our student population.

"This will go the way of private schools and private hospitals that created services just for the elite, but left more than 90 per cent of the population dependent on dysfunctional government services in which the upper class has no interest," says Prabhat Aggarwal, founder and coach, Aravali Scholars who is both an IIT and IIM(A) alumnus. "People who can make a difference are still interested in the governance of colleges like St. Stephens, the IITs, RECs, SRCC and IIMs."

The counterargument draws an analogy from healthcare: the elite are now going to expensive private hospitals, relieving pressure on government-run hospitals.

Globally, education is usually not-for-profit; even Ivy League colleges in the US are funded by individual and corporate philanthropy. But the issues in education are more than about public good versus private interest.

(This story was published in Businessworld Issue Dated 08-08-2011)