Public-Private Partnership Critical for Higher Education
Febuary 2009

Public-Private Partnership Critical for Higher Education

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Owing to constrained investment, the education sector is unable to cope with growing market demand and global competition. Increased private investment is thus imperative to expand infrastructure and provide greater access to quality higher education in India. E&Y – FICCI report emphasises that PPPs could be an effective mechanism for attracting much needed private sector investment in the Indian Higher education system without diluting the regulatory oversight of the Government and other regulators

India's enrollment figures in higher education remain abysmally low at a mere 11 % compared to that of the US and Canada, where over 60 % of college-age students access higher education, highlighting that public-private partnerships are critical for wooing investment in India's higher education system.

This shortfall in the number of young who are eligible for higher education and the existing infrastructure presents India's unique challenge, in terms of the sheer scale of its population. India has over 400 universities and more than 20,000 colleges with an enrollment of 14 million students, yet it is grossly inadequate.

A recently unveiled report by Ernst & Young and FICCI on various aspects of PPP, highlights some pointers to possible solutions to challenges faced in by the nation's education sector.

Gaping resource gap

The Government of India has allocated INR 850 billion for higher education in the 11th  Five Year Plan. However, considering that the Planning Commission has identified a resource gap of INR 2.2 trillion, it is unlikely that the Government alone can address infrastructure needs in the higher education sector in the
near future.

While public expenditure on education has increased, the percentage share of Gross Domestic Product (GDP) spent on higher education has come down from 0.77% in 1991 to 0.7% in 2008. Moreover, there is an unequal outlay of resources for Higher Educational Institutions across the Indian states.

Common misconceptions about PPPs

  •  Public private partnerships are the same as privatisation
  •  By entering into a public private partnership, public sector loses control over the provision of services
  • Public private partnerships apply only to infrastructure projects
  •  The principal reason for government entering into public private partnerships is to avoid debt
  •  Public sector employee will lose under public private partnerships The cost of service will increase to pay for the private partner's profit
  • There are only two partners in a public private partnership

 

Partnership models in education

The report presents basic modes of partnerships that are possible between the government and the private sector. Partnerships are established for varied reasons including construction, financing, design and maintenance of public infrastructure. PPP in social sectors such as health and education are sometimes referred to as Public-Social Private Partnership (PSPP). 
      
A number of PPP models can exist that range from simple management contracts to BOOT formats. These formats vary in the kind of benefits they yield. The report provides case studies of different types of PPP arrangements in education such as:

  • Public-private financing of higher education
  • Science/research parks
  • University-owned companies

The report underscores certain challenges that can be expected while applying the PPP model to education. For instance, the high cost of such projects, relatively lower returns, and the current regulatory landscape makes it difficult to attract participants/bidders for education projects. Another challenge is the lack of familiarity with the PPP procurement process.

The report suggests measures that can be implemented to avoid these hurdles. The process of attracting bidders should be framed to minimise the bid costs with effective competition. Also, the university/college can be protected by way of monitoring the services offered by private players. Certain cases of successful PPP projects in the education sector from other countries have been cited as examples, such as:

  • Southbank Educational and Training Precinct Development involved the development of high standard facilities for the Southbank Educational and Training Precinct
  • Royal Northern College of Music in the UK which involved development of about 160 study rooms, staff and guest accommodation, car parking facility and a walkway.

Industry-academia collaboration May include companies and institutes conducting joint R&D, industry internships, and corporates training and certifying students of affiliated institutes. Lastly, foreign university collaborations can offer access to world class faculty and international students, curriculum based on global standards and sharing of culture. These May take the shape of exchange programmes, joint research projects or sharing of infrastructure facilities.

Regulatory framework for PPP

An Higher Education Institute in India can be set up as a Trust, Society or as a Company registered under Section 25 of the Companies Act, 1956 (though the last is not recognised by the HRD Ministry). Several regulatory bodies regulate the functioning of higher education in India. These comprise the University Grants Commission (UGC), All India Council for Technical Education (AICTE), Medical Council of India, etc.

The higher education system suffers from several challenges that act as a hurdle in the growth of the PPP concept in India. These include the conditions imposed for setting up the educational institute as a not-for-profit entity; excessive regulations in the functioning of the HEIs and for the entry of foreign educational institutions into India.

Despite these challenges, the PPP concept in the education sector needs to be explored. Since there are regulations with respect to being a not-for-profit entity, the infrastructure for educational institutions can be created through the PPP model.

This could involve creation of a Trust by the Government/ HEIs to offer education services, which collaborates with a private player to avail infrastructure like buildings, hostels, laboratories, etc. This kind of a model would uphold the regulations imposed on educational institutions as well as leverage the partnership between the government and the private sector.

Findings

As a conclusion the report underscores the challenges that India's higher education sector f

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