On sale: how the Modi regime is handing over higher education to market profiteers
India's higher education is bracing for a seismic shift. Soon, a large part of the funding for central higher education institutions will come not from the government but the market.
The upcoming Higher Education Financing Agency (HEFA), which was approved by the central cabinet on 12 September, has been tasked to mediate between the market and central institutions such as the IITs, IIMs, NITs to raise money for "infrastructure development".
HEFA is expected to raise up to Rs 20,000 crore from the debt market, and give it out as 10-year loans to centrally funded institutions which need the money. The institutions will need to repay the principal amount through the revenue they earn, called "internal accruals", while the interest will be paid by the government.
So, if a central institution wants funds it will have to increase its revenue in order to pay back, which is bound to lead to significant hikes in student fees.
As of now, the government pays for nearly 80% expenses of a central institution like an IIT. And it is thanks to the government funding - or subsidy - that students can access quality higher education in Indian public sector institutions and universities at a low cost unlike in private institutions that charge a bomb.
HEFA, though, can be a stepping stone to the government's withdrawal from public higher education institutions.
While the government may cite the fiscal deficit as the reason for its unwillingness to spend more on higher education, the educationists that Catch spoke to held up HEFA as proof of the Narendra Modi regime selling out to the World Trade Organisation, which regulates international trade and treats education as a commodity that can be traded in the global market.
But before getting into this argument, let's look at some technical details.
What is HEFA?
The agency is meant for "funding projects for infrastructure and development of world class labs in IITs/IIMs/NITs and such other institutions".
HEFA will operate as a Special Purpose Vehicle of either a Public Sector Bank or a state-owned Non-Banking Financing Company, which will be the identified promoter. It will be "jointly promoted by the identified promoter and the Ministry of Human Resource Development with an authorised capital of Rs 2,000 crore," according to the government's press release issued on 12 September.
Of the Rs 2,000 capital base, the government will provide Rs 1,000 crore. Although the source of the rest of the money was not specified in the press release, it has been earlier reported the the remaining equity will be raised from five corporate donors, each contributing at least Rs 200 crore.
As a not-for-profit organisation, HEFA will raise funds up to Rs 20,000 crore from the sale of bonds in the debt market, which will be supplemented by donations and Corporate Social Responsibility funds.
Finance Minister Arun Jaitley had announced creation of HEFA for the purpose of financing "improvement in infrastructure in our top institutions" in his budget speech on 29 February.
All centrally funded higher educational institutions, including central universities, will be eligible to take membership of HEFA and receive loans for their infrastructure needs.
To join as a member, however, the institution will need to escrow (place in custody) a specific amount from its revenues for the next 10 years with HEFA. This escrow amount that will flow in over 10 years - or the secured future flows - will then be "securitised" by HEFA, that is, converted into tradeable securities such as bonds which will be sold to investors in the debt market to raise cash. The agency will borrow from the market at around 8%, the current 10-year gilt rate, and the cash will then be given to the institutions in question as loans at a slightly higher interest rate.
"Each member institution would be eligible for a credit limit as decided by HEFA based on the amount agreed to be escrowed from the internal accruals," the press release stated.
Case of cash-strapped IITs
The centrally funded higher education sector - both technical institutes and universities - is facing a severe fund crunch as budgetary allocations by the government have not met the demand.
This year, the HRD ministry approved a steep hike in annual tuition fees at the IITs from Rs 90,000 to Rs 2 lakh, and at the NITs from Rs 70,000 to Rs 1.25 lakh.
After protests by students, the government offered interest-free loans to tide over the financial burden, but only for IIT students. It also announced full waivers for students from the reserved SC/ST categories, and those with a family income under Rs 1 lakh per year. The interest on the loans, however, will have to be paid by the IITs, which are already cash-strapped. In fact, the IITs have also been facing a faculty crunch for some years due to insufficient funds.
The latest move will, thus, lead to a vicious cycle, wherein the IITs will be compelled to borrow more and more money and, to repay it, generate more revenue. Revenue sources include research earnings and project consultancy fees, but the tuition fees from the students will be the biggest source as the government tightens its own purse strings.
One of the reasons cited for the lack of funds with the IITs is that the allocated funds had to be redistributed to the new IIT branches that have come up.
It was reported in May this year the the Parliamentary Standing Committee on HRD headed by Satyanarayan Jatiya had recommended that the budget allocation for higher education be increased.
According to the 12th Plan Approach Paper, about 18% of all government education spending, or 1.12% of GDP, should be spent on higher education, but the parliamentary committee recommended raising the allocation to 25% of the government's education spending or 1.5% of the GDP.
Similarly, in the 2016-17 fiscal year, the demand raised by the UGC was for Rs 3,698.71 crore but the budgetary allocation was only Rs 2,105 crore.
Selling out higher education
Higher education is an investment by the state that provides long-term returns, and is an indispensable instrument for a country's development.
Take, for example, the developed nations in Europe, where education is heavily subsidised by the state. While India may give the excuse that it cannot afford to spend more on education than it does because it's not yet a developed country, the question to consider is whether spending on public welfare sectors such as health and education precedes a nation's economic development or follows it.
Especially in a developing country like India, higher education not only creates the intellectual capital vital for progress, it's also the gateway to upward social and economic mobility.
The dismantling of the "public" character of public sector institutions, as HEFA essentially seeks to do, is in keeping with the diktats of the neoliberal global market. The profiteers that rule this market are increasingly dictating policy in developing economies and opening them up for international trade, which enriches the global corporate and financial while diluting the citizens' rights and protections as provided by the state.
Prof Anil Sadgopal, former dean of Delhi University's Faculty of Education and a member of the All India Forum For Right To Education, warned that "HEFA is a declaration by the Modi government of a total sellout of India's public-funded high quality educational institutions like IITs/IIMs/NITs to the global market. These institutions have been assiduously built over decades, the IITs since the mid-1950s for example, with the people's money but now will be handed over on a platter to the market for profiteering."
Prof R Ramakumar, Dean of the School of Development Studies at Tata Institute of Social Sciences, Mumbai, said, "The thinking behind the model suggested is clearly policy-induced. Education is not seen as an instrument of national development but as a commodity. This approach has its genesis in the Nairobi ministerial agreement of the WTO negotations, 2015. The WTO General Agreement on Trade in Services considers education as a globally tradeable service. Under it, the opening of a Walmart store is no different from opening a university."
Prof Ramakumar pointed out that while "expenditures on higher education have been sharply cut in India to achieve fiscal compression targets", the "Nairobi ministerial agreement of the WTO would force India to open doors to higher foreign investment in education".
"It is in this context that the government is offering HEFA as a 'There Is No Alternative' model of commercialisation in education," he added.
Prof Sadgopal echoed this worry, saying the creation of HEFA "amounts to kowtowing to the imperialist agenda of the WTO-GATS regime."
As to the provision of repaying the principal amount of the HEFA-mediated loans through "internal accruals", the educationists agreed that it would lead to the implementation of a market-linked fee structure in public sector institutions, which means the fees could skyrocket.
Prof Saumen Chattopadhyay, who teaches at the Zakir Husain Centre for Educational Studies, JNU, said HEFA will gradually destroy the subsidised system that ensures high quality higher education at low costs. "After HEFA comes up, these institutions will be pretty much left to fend for themselves. If an institute wants money, it will need to ensure its earning increases. This will lead to a situation where low fees will necessarily mean low quality while high fees will guarantee high quality, unlike the subsidised high quality education that students from weak economic backgrounds can also access."
"This will also lead to a differentiation between public sector institutions. And it will certainly severely impact access. Only those who can afford to pay for high quality education will get it. The rest will have to resign themselves to low quality higher education."
Prof Sadgopal added, "This is also a blatant abdication of the constitutional obligation that flows out of Articles 14, 15(1) and 16, requiring the state to ensure that higher education promotes equality and social justice and eliminates discrimination. The provision of 'internal accruals' in HEFA implies nothing but multifold fee hikes leading to exclusion of the vast majority of Indian youth, especially tribals, Dalits, OBCs and Muslims, with women being the worst victims in each of these segments."
Student loans not the answer
As far as "educational loans" are concerned, which are increasingly being proffered as the solution by the government and the corporates alike, Prof Ramakumar explained, "A casualty here would be students, who would find higher education increasingly difficult to finance. Neoliberalism has an answer to this too: educational loans. Educational loans are competitively offered by banks at soft interest rates to attract "customers". Given the poor quality of education that the loan finances, the crisis of employability sets in soon. Students end up repaying educational loans for many years after the completion of their education."
He added, "Global experience shows that student debt cycles are vicious. Within educational loans in India, a good proportion are already classified as bad debts. Policies like HEFA would only exacerbate such burdens on our students."
He offered the examples of the United States and Britain to underline the disastrous effects of the commercialisation of education. "The state should not subsidise intellectual curiosity," US president Ronald Reagan, the high priest of neoliberalism, had said before dismantling public higher education in his country in the 1980s.
Reagan cut by half the federal budget for education. Today, higher education in the US is unaffordable for vast sections of the middle class and the poor. "If tuition was free at the University of California at Berkeley in 1960, the fee in 2014 was $12,872, excluding the $14,414 charges for room and board. Similar was the experience in the UK under Margaret Thatcher. The golden age of universities in the UK, initiated by the Robbins report, was cut short after 1979. Government funding for universities was cut by 20 per cent, and tuition fees shot up with no proportionate rise in quality," Prof Ramakumar said.
"It is no surprise that both Bernie Sanders and Jeremy Corbyn owe their popularity among the people in large part to their pledges to abolish tuition fess in the universities."
Prof Sadgopal pointed out another casualty of the new initiative. "Making research and knowledge production dependent on market loans will allow transnational corporate capital to dictate what is knowledge and what is not, even if it goes against India's national interest."
Indeed, he described HEFA as an "anti-national" policy because "it will dilute India's sovereignty by increasing our dependence on the patented knowledge of the advanced western economies".
"A truly nationalistic government will instead increase public funding for the entire education sector, including higher education, thereby making education of equitable quality entirely free from 'KG to PG' in consonance with the Constitution."