Thursday, August 11th, 2022 05:36:00

Privatisation Of Higher Education Issues And Challenges

Updated: June 4, 2011 1:20 pm

The Gross Enrolment Ratio (GER) in higher education is much lower in India, in comparison to the GER world average. This ratio needs to be increased from 13 per cent to 30 per cent by 2020. This means that enrolment in the higher education should expand to 40-45 million from a mere 13 million today. If this ratio has to be achieved India requires huge funds. This daunting task can be achieved only by permitting the participation of the private sector in higher education. Privatisation of higher education is considered to be the pragmatic alternative to limited resources, other priorities of government and bottlenecks in the governmental regulations. Government, at best, can promote and give direction to privatisation in higher education in India by policy changes, incentives and some control to minimise lapses and malfunctioning without undermining the autonomy of educational institutes.

            Higher education is viewed as a long-term social investment for the promotion of economic growth, culture, social cohesion, equity and justice. In fact, the Planning Commission estimates that by the end of the Twelfth Plan (2012), almost half the incremental enrolment target will be met through private institutions. To attract quality private participation, it is essential to allow investors a reasonable and legitimate return on their investment. Presently, the privatisation of higher education is permitted only through the organisational structures such as trusts/societies and Section 25 of Companies Act. This form of organisational structure doesn’t allow profit making and leads to several malpractices of siphoning profits.

Regulatory Mechanism

There is no legal mechanism available for the investors towards the reasonable rates of returns on investment made by him. There is an urgent need to put a system in place, which allows a higher return on investment and a consensus for a profit model. This model will attract taxation but large investors are willing to pay tax. It is, therefore, critical that the government, other stakeholders and civil society acknowledge this reality, and the government puts in place a regulatory regime that would oversee the functioning of both public and private institutions, in a transparent manner to ensure that both access and funding for quality education are available to every Indian. It is also a fact that there is a lot of (misplaced) ideological opposition to a for-profit model. Given the compulsions of a democratic process, achieving consensus on this issue will not be easy and will take time. However, experience with reforms in other sectors of the economy has shown that de-controlling has led to long-term gains. It is believed that the same would be borne out in the education sector as well; someone just needs to bite the bullet.

            It is widely known that building a consensus for a for-profit model will take a long time. Now, question arises: What should be done in the intervening period? Here, the efforts of the HRD Minister in bringing legislative changes and reforms to ensure that the private sector participation becomes reality. The government has tabled four new bills in the Parliament during the last session. These propose to overhaul the higher education system in India. These initiatives are steps in right direction and will act as directional change of mindset of the government. In fact, these bills will come as a breather, and will bring about improved governance and transparency, create infrastructure for benchmarking and quality rating and lay the foundations for creating an ecosystem, where public and private, for-profit/not-for-profit, domestic or foreign institutions will be able to create an environment of quality education. If this happens, the education sector should prove to be the next big thing, and India should become a global hub for education.

            It will not be out of place to mention that the private sector has been playing this role quite competently since ages. Evidence shows that the India Institute of Science (IISc), Bengaluru and Tata Institute of Fundamental Research (TIFR), Mumbai, were established by the private sector players. The Birla Institute of Technology and Science, (BITS), Pilani, and Tata Institute of Social Science, (TISS), Mumbai, were also established by private industrialists. No doubt these private initiatives were primarily driven by philanthropy and fell in the category of “Not-For-Profit-Basis”.

            With the passage of Private University Regulations and Enabling Acts/Regulations in various states, the last decade has also witnessed establishment of private universities and institutions of higher learning, which have significantly contributed to the spread of higher education and helped in achieving the GER, which needs to be further improved.

            The higher education in India still continuous to be ridden with problems and private partners are looked down upon with suspicion. The issues are inter-dependent and include: broadening of access in higher education; ensuring equity in higher education; the financial crunch and need for privatising higher education as a remedial measure. The crucial question which needs to be further debated is that privatisation doesn’t lead to commercialisation. This apprehension among the policymakers and those who oppose privatisation vehemently, need to be satisfied by ensuring proper regulatory mechanism by regulating the rate of return on investments made by the private sector vis-a-vis ensuring quality in education.

Public-Private Partnership in Higher Education

Over the last decade, Public-Private Partnership (PPP) has emerged as one of the most effective models for developing and delivering the public services in the area of infrastructure development. Whether the PPP model in the education sector, which is still at nascent stage, would be successful, is yet to be seen. Formal education is well regulated in India, whereas non-formal education such as vocational training, tuition and coaching classes, etc., is under an unregulated regime. The PPP model in higher education is being considered by the Planning Commission to be one of the methods of privatisation. This could be in the form of outsourcing model, hybrid model and basic infrastructure model. The government is yet to come out with a PPP-model policy in higher education. For PPP to succeed in a not-for-profit model the government has to provide the viability gap funding, for which huge budgetary allocation at both central and state levels will be an uphill task.

Opportunities for Private Sector Participation

India spends about 3.7 per cent of national GDP on education. Of this, a meagre 0.66 per cent is the amount spent on higher education, which is less than sub-Saharan African’s median. The Education Commission, set up in 1964, under the chairmanship of Dr DS Kothari (Kothari Commission), had recommended that government should spend at least 6 per cent GDP on education. However, over 40 years, we have been able to achieve only half the target. The Knowledge Commission additionally recommends an increase of at least 1.5 per cent of GDP for higher education, out of a total of at least 6 per cent of GDP for education overall. Inadequate budgetary provisions and low-fee structures have led to slow expansion of government institutions and created a huge demand-supply gap in the higher education space.

            Private sector can play a very significant role in delivery of higher education in the following ways:

  1. Directly running universities on a not-for-profit basis through charitable trusts/societies, as part of a corporate social responsibility (CSR) mandate.
  2. By delivering innovative educational services on a legitimate for-profit basis both to institutions imparting formal education and directly to students. The government can encourage this initiative and leverage entrepreneurial energy and innovativeness to improve the quality of formal education, particularly, in government-run institutions. Some of these services, particularly in areas of skill development would also serve the objective of vocational training and improving employability and to a limited extent, also reducing the pressure on formal higher education.
  3. A PPP in which there are varying degrees and forms of participation by both the public and private sectors to jointly deliver formal higher education. The government has introduced a PPP model in vocational training with mixed results. While there are no working models in higher education.
  4. A model in which the private sector is allowed to run formal educational institutions on a for-profit basis.


Planning Commission has also suggested a greater private sector participation in higher education. It is of the view that a suitable facilitative environment should be created to allow such institutions to support the objectives of expanding higher education. There are views for and against privatisation of higher education in India. While some have started criticising the concept even before it has come to be defined and taken off the ground, others consider it very useful and indeed, inevitable. The challenges, however, are expansion of enrolment in higher education with inclusiveness, quality and relevant education, with necessary academic reforms in the university and college systems. Since India is marching towards high economic growth rate, it would require to invest more funds in higher education, and the participation of private sector in delivery of quality education cannot be over-emphasised. However, this requires a well-regulated and facilitative environment and government must take a timely action to ensure that India doesn’t lose a demographic advantage.

By Prof Satyapal Narang

(The writer is Executive Director, New Horizon India Limited)

Comments are closed here.