Starved of finances, HEIs struggling to make a mark    

One of the significant measures announced as part of the Central budget for 2016-17 is the establishment of Higher Education Financing Agency (HEFA) with the objective of developing high quality infrastructure in premier educational institutions, which include IITs, IIMs, NITs and Central Universities. As a follow-up, the Central Cabinet approved (on September 12, 2016) creation of the Agency as a joint venture between the Ministry of Human Resource Development (MHRD) and an identified promoter.

The promoter is not identified yet, but it may be a PSU bank or government sponsored non-banking financial company (NBFC). The Agency is proposed to be set up as a special purpose vehicle (SPV) within the identified promoter. It is also proposed that the authorised capital of the HEFA would be Rs 2,000 crore and the Central government would subscribe to equity of Rs 1,000 crore.

It was decided that all the Centrally sponsored and funded higher educational institutions (HEIs) would be eligible to become members of the Agency. For the present, the existing 17 IITs, 20 NITs, 13 IIMs and 47 Central Universities would be members of the Agency. The reality is that the higher education system is loaded with a vast number of State universities and colleges offering diverse UG and PG Programmes.

The list of institutions intended to be covered may form part of about 10 per cent in terms of the number of institutions and just 2-3 per cent in terms of the student intake. The sweep and coverage of the centrally funded institutions is quite minimal. It is only in terms of funding, they account for a major share of the MHRD. Ipso facto, while the institutions get funds directly from the Ministry through budgetary allocation, a vast majority of State universities and college get their share through the University Grants Commission (UGC).

Under these circumstances, it is the State-sponsored institutions that are in dire need of funds through the newly created HEFA. Therefore, the Central government shall take a decision to include these in the list of eligible institutions to receive financial support. Operationally, it is proposed that every member institution shall open an ‘escrow account’ with a specific amount from their internal accruals for a period of 10 years to be eligible to get a ‘credit limit’ from the Agency. The crucial issue in this context is the ‘internal accruals’.

As is known, the Indian higher education system has not conducted itself so far for raising any surplus. The mechanism put in place was a grant system; whereby the State-promoted HEIs would get funds from the sponsors and they tailor their needs accordingly. Secondly, the fee structure of the institutions is highly subsidised with no room for any surplus. Even University of Hyderabad, which received the ‘Best University’ Award from the President of India, is now reeling under severe financial crisis.

The funding pattern conceived in the proposal is that the member institutions would contribute from their internal accruals over the years, at least for a period of 10 years, initially and these inflows would be ‘securitised’ to mobilise funds from the market. To begin with, the Cabinet is said to have cleared a proposal, permitting HEFA to raise to the extent of Rs 20,000 crore by way of loans and bond sales. These moneys would be lent to the member institutions for a specific purpose with or without interest.

The purposes identified also included funding of member institutions for infrastructure development and promoting themselves as world-class labs in the higher education network. It is a known fact there is no Indian Institution in the top 500 institutions as per the 2016 Times Higher Education rankings. The first institution that got 503 rank is the Indian Institution of Science, Bangalore; whereas IIT, Bombay got 511 rank. Altogether, there were only 9 institutions belonging to India in the first 1000 ranks. This speaks of the stupendous task ahead. (Writer is Former Vice-Chancellor, Acharya Nagarjuna University)

By Prof K Viyyanna Rao