The proposed Foreign Educational Institutions (Regulation of Entry and Operations) Bill, 2010 seeks to permit foreign players into India's higher education system. There is no dearth of applications for opening private higher education institutions. In addition to the existing 7,000-plus engineering colleges through which 8,00,000 students graduate every year, 2009-10 saw more than 200 applications considered favourably for establishing engineering colleges.

In the U.S., particularly, the financial tsunami has forced the Department of Education to slash funds at all levels — school, community colleges and universities. Budgets are being cut from many state-supported universities as they are facing huge shortfalls. With rising tuition fees affecting local enrolments, foreign universities are forced to look at alternative geographical markets to increase enrolment.

The Ministry of Human Resource Development estimates that permitting foreign universities will reduce the foreign exchange outflow by 75 per cent. This is questionable. According to an ASSOCHAM report, the annual outflow of foreign exchange due to Indian students going abroad is $ 10 billion.

Despite the availability of quality subsidised engineering and management education in India (on average, an engineering or management student in a reputed institution pays $120 a month as fees compared to $1,500-5,000 in an equivalent institution the U.S., Canada, Australia, Singapore and Britain), about five lakh students go abroad every year.

One of the main reasons is the high quality of the post-graduate and doctoral degree programmes offered in institutions abroad, delivered through innovative methodologies and abundant flexibility. In addition, the students crave for foreign exposure which can be a springboard for a global career. Even if foreign universities open up campuses in India, a vast majority of students will still prefer to leave India, and the impact of this on foreign reserves will continue to be felt.

Faculty crisis

A fallout of permitting foreign universities is the likely flight of teachers from the Indian institutions, compounding the existing shortage of qualified faculty. The Indian universities will not be able retain their teachers as with their drastically lower fee structures, they cannot match the pay packets of the foreign universities.

The persisting faculty crisis in Indian higher education presents a bleak picture. On May 5 this year, the Lok Sabha was informed that 34 per cent of the 11,085 teaching positions across 22 universities in India are lying vacant. The paucity of qualified faculty is felt even more in professional and technical institutions. With the engineering students in India increasing every day, institutions are facing a faculty shortage to the extent of 67 per cent all over the country. Even in premier institutes like the IITs, faculty shortage is an issue of serious concern. Foreign universities can only add to this.

In terms of infrastructure, many Indian universities can boast of a world class facility. But the lack of academic and administrative freedom is constraining many from meeting global standards.

Until the AICTE was conferred statutory powers in 1987, only the universities and the State Governments had powers to set up technical educational institutions. During the late 1970s and 1980s, the governments of Karnataka and Maharashtra permitted private trusts and societies to establish educational institutions. In 1984, the Tamil Nadu government followed suit and started permitting self-financing institutions. Andhra Pradesh was the next, joined by all the States and hence imparting higher education no longer became the exclusive duty of the state. The Supreme Court judgment in Unnikrishnan's case also paved the way for collection of the actual expenditure incurred per student in an unaided institution.

There are several regulatory bodies like the UGC, the AICTE and the MCI, stifling the growth of education under the guise of regulating institutions without giving them functional freedom. Freeing institutions from such regimental shackles would be a far wiser option than inviting foreign universities to our shores.

If the MHRD is dead set on permitting foreign universities, it should allow a calibrated entry. At the moment, it seems that foreign universities will target only the huge undergraduate degree market, as introducing postgraduate courses here could endanger the enrolment of Indians on U.S. campuses. The government should hence permit them on condition that they begin with postgraduate/doctoral education for the first 10 years with their own existing faculty. While this will be a litmus test of the true intentions of the foreign universities, the time period will help level the playing field for Indian institutions to take on foreign competition.

Financial control

Also, there needs to be a tightening of the Act to ensure that foreign universities plough their surplus back into educating Indians. On the surface of it, Section 5 (3) of the Act appears to do this. It states that no part of the surplus in revenue generated in India by a foreign education provider, after meeting all expenditure in regard to its operations in India, shall be invested for any purpose other than for the growth and development of the educational institutions established by it in India. Even a layman with no accounting knowledge will know that accounting firms have in stock numerous mantras to divert funds, not necessarily by way of profit. The Act must hence prevent the diversion of funds in any form and not just the diversion of surplus.

With a plethora of issues confronting Indian education at all levels, the foreign university Bill is an unprescribed pill.

(The writer is Indian Overseas Bank Chair Professor, School of Management and Dean, Planning and Development, Sastra University, Thanjavur, Tamil Nadu.)