The Hindu : Sanity on private funding

Online edition of India's National Newspaper
Wednesday, Jul 16, 2003

Opinion

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Sanity on private funding

By Pratap Bhanu Mehta

We need to make education broadly available, but restricting the freedoms of those who are willing to invest and willing to pay for education is self-defeating.

AS THE Supreme Court gets ready to hear a bunch of petitions relating to admission quotas and fees in private colleges, the vexed issue of the role of private capital in higher education has once again come to the forefront. The issues at stake are often clouded by the terms of debate that are being used to define them. There is immense outrage at the open extortion that often takes in the education market. We still cling on to the idea that education should not be treated as a for-profit commodity, the ability to pay should have no bearing on who gets access to private institutions, and merit should be the sole criteria for admissions. Thus fees should be highly regulated, management quotas should be very limited and the state should monitor these institutions closely.

I think everyone can agree on a few basic propositions. First, there is a serious shortage of quality higher education in the country.This lack of quality education is even more appalling in the basic sciences, social sciences and humanities. We often tend to forget that 70 per cent of our students will enrol in non-professional courses. The quality of basic undergraduate education will have a greater impact on the overall quality of human capital than all our professional courses combined. Second, it would be a travesty of justice if only the rich and the privileged got access to higher education because the state's resources are limited. Third, the quality of many private institutions is appalling, and many of them engage in open extortion. The question is: Will the regulation of private institutions help us solve these problems?

Let us take the supply first. Very few people would disagree with the proposition that we need more public investment in higher education. But we have to be realistic about how much investment we are likely to see in the near future. Treating education as a not-for-profit sector sounds good. But it has the perverse consequence of discouraging investment in education. If you were fortunate enough to have some capital to invest, would you invest it in a sector where you are not allowed to make some profit? Remember what happened to our film industry because we did not treat it as a legitimate industry. It drew funds from illegitimate sources. Similarly, so many private institutions of higher education are money-laundering operations with serious involvement of politicians and swindling businessmen. They make profits by underhand means, because our official ideology will not recognise any other.

It is a false choice to say that education should either be for profit or not-for-profit. It can be both depending on the kind of institution that provides it. If an institution wants to claim tax exemptions, get support from the state, or advances certain social goals, then it has to be held up to the standards of a non-profit institution. But for institutions that do not seek this support, there is no a priori argument as to why they should not be allowed to run a legitimate business. Education could have been our comparative advantage if we had treated it as an industry. Instead, India is now a net subsidiser of the budgets of dozens of universities abroad. Despite enormous talent, we do not have a world-class university in the country, pure and simple. While we do not have nearly enough high schools, we still have proportionately more good quality schools than we have institutions of higher learning. This may have something to do with the fact that the school sector has, by default, been regulated less.

Education is expensive and someone has to pay for it. Strict fee regulation may appear to be in the interest of social justice; but it ends up diminishing both the supply and the quality of education. Those with the ability to pay serious money for their education simply end up withdrawing it from the system. There should be more outrage at the fact that so many Indian students individually pay thousands of dollars annually to third rank British or Australian institutions, but Indian institutions are barred from mobilising this money. The state institutions cannot use the resources of these students because of stringent fee caps, and private Indian institutions are often discouraged from doing so as well, because of restrictions on admission policies. One of the unintended effects of too much fee regulation is that those very students whom these policies were designed to help remain condemned to second rate institutions while the rich continue to get opportunities to exit these systems.

Any sensible education system would try and mobilise as many resources as it can from those who can pay, and use them to improve both the quality of institutions and their capacity to cross subsidise those who cannot pay. Intelligent incentives for encouraging private institutions to admit economically weaker students are probably more important than stringent admission regulation or fees caps. What we need to strike is a balance between the needs of private institutions to mobilise resources on the one hand, and their status as places where merit counts on the other. The compromise that was struck in the wake of the Unnikrishnan case verdict was probably not a bad modus vivendi, but attempts to curtail the discretion of institutions will in the long run have unintended adverse consequences.

Finally there is the issue of the quality of private institutions. We should acknowledge that the state is a very bad regulator of educational quality. Its own institutions are cheating millions of students of a decent education, and the idea that it should bureaucratically standardise and stifle private innovation and experiments ought to be a matter of concern. We probably need minimum accreditation standards, but for most professional courses such as medicine and engineering, the market is as good a regulator as any. Part of the monitoring function can be carried out, not by a centralised body, such as the University Grants Commission or the All India Council for Technical Education, but professional bodies themselves. If students of particular institutions routinely pass examinations that entitle them to professional practice, this is not a bad signal about the quality of institutions they come from. It also gives students a clearer signal of their prospects. Unfortunately, decentralised professional regulation of quality is totally absent. Most universities around the world are adjudged by their ability to get their students returns on their investment, get them jobs. Universities and courses that do not impart the right kinds of skills find it difficult to attract good students and high fees. This kind of competitive pressure is the only way of ensuring proper regulation. While the state has a proper role as a watchdog, we should be wary of too much state regulation, especially where taxpayer money is not at issue.

This is not to exonerate the conduct of private institutions. Many of them are giving sub-standard education, and often the minimum information needed for informed judgments — recruitment patterns, quality of infrastructure etc., — is difficult to get. Many institutions are not run by legitimate "education" entrepreneurs, but by a seedy combination of politicians and business. Most of the successful private institutions around the world have run on mixed principles. They combine a philanthropic endowment that allows the institution to subsidise unprofitable activities and good students, with high fees and great discretion over admission. In India we hardly have any examples of this kind. Finally, few private institutions have shown any long-term vision in education, creating pedagogical experiments that others could follow. The state is in part to blame for this: the requirement that most private colleges be linked to state university curricula has stifled innovation. The Association of Indian Universities and the UGC have such preconceived ideas of the format of education that it is difficult to innovate. But our private entrepreneurs have not acquired the self-conscious ideology of delivering excellent products that so many successful private institutions around the world have.

But these are not sufficient reasons to place more restrictions on private institutions. We need to make education broadly available, but restricting the freedoms of those who are willing to invest and willing to pay for education is self-defeating. The education sector needs more supply and less regulation.

(The writer is Professor of Philosophy and of Law and Governance, JNU.)

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