Expert Comment

Expert Comment

Towards an Educational Companies Act

Education in general and higher education in particular, is the prerequisite of social and economic development. It’s because this linkage has been proven beyond doubt that every country is now pouring money into education.

To their credit the industrial nations of the first world became aware of this linkage almost a century ago, and are reaping the advantages of their sound educational systems and high quality research capabilities which convert knowledge into wealth. Therefore they attract the best brains from around the world into their education systems and research programmes, which converts into human capital.

On the other hand the developing nations of the third world are struggling because they lack good education systems and/or research and development (R&D) capability. Consequently they are out of the race to build ‘knowledge economies’.

Indian education is at the crossroads, confronted with divergent issues. At one level mass access to education has to improve and at the other, the education being delivered has to be relevant and qualitatively superior. The attainment of either or both these goals requires considerably greater investment in education. The Kothari Commission had recommended government (Centre plus states) spending at a minimum of 6 percent of GDP in 1966. But it remains less than 4 percent.

Meanwhile discussions and debates in Indian academia centre around whether education should be a ‘merit’ or ‘non-merit’ good; at what level and how much foreign investment should be allowed into the education sector, and what should be the modalities of participation by private education providers. The absence of any clear and well-defined long-term policy and debating of half-hearted proposals based on political expediency is compounding the confusion. In reality it’s a free-for-all situation across the entire education spectrum — primary to tertiary. Private education providers are ubiquitous in primary, secondary and higher education with little control over the cost or quality of education provided by them.

The late 1990s witnessed the transformation of a growing number of private professional colleges into deemed-to-be (or deemed) universities, which promised to promote teaching and research in emerging disciplines such as IT, biotechnology and genetic sciences. Instead a large number of self-financed engineering, medical and pharmacy colleges were granted deemed-to-be university status. These mainly family-run deemed universities admit students from across India, and a recent judgement of the Supreme Court allows them to charge ‘reasonable’ fees determined by them. Consequently capitation levies and ‘reasonable’ (high) tuition fees have been legitimised and are the prerequisite of admission into deemed universities.

Indeed the Central government is creating favourable conditions for the promotion of private colleges as witnessed by recent decisions of the Union HRD ministry and University Grants Commission (UGC) on promotion of deemed universities. Earlier promoters had to have a record of involvement in charitable and social work to establish a deemed university whether of de novo status or by clubbing educational institutions affiliated to a public university. But currently under a new law, UGC can exempt organisations from establishing a separate trust or society to promote a deemed university if there is a ‘sponsoring body’. Such an arrangement allows the sponsoring body to legitimately charge leasing fees, which could become a huge source of income for it. Curiously the process of granting exemption is an executive decision. This is a clear negation of the sacred principle that education provision has to be a not-for-profit activity.

The best way out of this unhealthy situation is to stop classifying education as a not-for-profit activity. Such altruistic notions about higher education were perhaps appropriate in the last century. But now the ground situation has changed and with global competition knocking at our doors, we need to develop trained manpower urgently. Therefore the requirement that all education institutions must necessarily be promoted by societies and trusts needs reviewing. Education should be brought under the purview of the Companies Act to permit private educators to promote education firms to earn fair and reasonable profits.

Better still, we need to debate what needs to be done to formulate an Educational Companies Act which incorporates the best principles of the Companies Act and facilitates establishment of educational corporatism in the domain of education. This would also require creation of an independent regulatory authority (independent of government) comprising members from academic, financial and industry domains to monitor education companies with powers to punish malpractice.

The time has come to take bold decisions. Public education institutions with non-profit goals co-existing with private institutions driven by fair profit motive will augment education capacity, create healthy competition and address age-old questions of access and quality while putting India on track towards becoming a knowledge economy of the 21st century.

(Dr. Arun Nigavekar is a former chairman of UGC and currently Raja Ramanna Fellow at Pune University)