Private and foreign corporate investment may soon get to flow into Indian higher education with the government considering a move to reform policy that hinders such financing.
Currently, it is not possible for non-profit companies under Article 25 of the Companies Registration Act -- like industry associations -- to set up an institution and get university status and recognition from the University Grants Commission.
Educational institutions in India can be set up only by trusts, societies and charitable companies, but the profits cannot be taken out of the institution and have to be reinvested. Not only does this restriction hamper expansion, it also encourages promoters to resort to creative accounting to take out profits from the institutions.
Now, under encouragement from an influential political ally from Maharashtra, the United Progressive Alliance government is expected to clarify this clause, sources told Business Standard.
There is also renewed hope for a Bill allowing foreign universities and institutions into India to be tabled in Parliament, judging by Human Resources Development Minister Arjun Singh's remarks at a conference of state education ministers two days ago.
The Left parties were the principal opponents of the Foreign Education Providers (Regulation) Bill, which was cleared by the Cabinet in 2007 but never introduced in the Lok Sabha although it was listed in the agenda papers.
"We have tried to accommodate some of the concerns. We will try to introduce the Bill in the Lok Sabha session beginning August," Singh said. The Bill seeks to regulate foreign institutions setting up campuses in India. A contentious issue is whether caste-based reservations would apply to these institutions.
Both Oxford and Stanford Universities have evinced interest in setting up campuses in India but have been hesitant about moving forward until they are clear about the degree of regulation, funding and other issues.
Experts say the moves would provide clarity on funding of higher education institutions by overseas entities. "This will probably provide funding clarity for foreign institutions like charitable organisations or NRIs wanting to set up facilities in India.
The passage of the Bill shall give a boost to foreign universities and enhance competition in the country. It will be survival of the fittest, although care will have to be taken to ensure that fly-by-night operators are kept out and quality is maintained," said Vidya Yeravdekar, principal director, Symbiosis Society.
Those supporting the opening up of the higher education sector to foreign investment argue that India should open its doors to investment before the World Trade Organisation forces it to do so.
However, the HRD ministry has argued that WTO pressure for foreign investment in education may take time coming as several Islamic countries are opposed to such a move.
Whether the Foreign Education Bill will involve the appointment of a regulator or afford more autonomy to foreign institutions will have to be decided by the government before it is tabled in Parliament.