Private universities in India need a level playing field

A lot is said about the quality of higher education globally, especially in developing nations like India, where quantity – as measured through gross enrolment ratio, or GER – remains one of the lowest in the world, at around 15% compared to 30% in China.

Surprisingly India, which has a severe infrastructure deficit and is a comparatively poor nation, has found itself in a unique place that remains unparalleled in richer nations. Today, around 80% of India’s higher education and healthcare is provided by private agencies without any aid whatsoever from the government.

Interestingly, both education and healthcare are part of the soft infrastructure. Private higher education and healthcare service providers look after 80% of the nation’s 1.21 billion people, and are required to deposit various fees to regulatory bodies to get a licence to operate.

The difference between higher education and healthcare is that in higher education all courses except medicine are oversupplied whereas the MBBS is tremendously undersupplied. In spite of lower GER and a huge shortfall of doctors, both sectors face enormous employment challenges in a slowing economy, although there is a huge shortfall of affordable medical professionals and service providers in India.

Essentially this means the government has washed its hands of both higher education and healthcare, and looks at both as a revenue opportunity.

The greater the number of higher education institutions, the greater the fees earned by the All India Council for Technical Education (AICTE), an autonomous body that regulates most of the professional courses, from engineering to management. They also act as a revenue stream for the affiliating university, as most private institutes operate as an affiliated college under a state university.

Anna University of the state of Tamil Nadu, for example, has 600 or more affiliate colleges, catering to hundreds of thousands of students. Most state affiliating universities have hundreds of colleges, and so India has the highest number of institutions in the world.

Sustainability of colleges

A simple arithmetical calculation of the sustainability of these affiliated colleges, most of which are private, will do.

An MBA in most AICTE-approved affiliated colleges typically costs a student a tuition fee of Rs100,000 to Rs150,000 (around US$1,850 to US$2,800) over two years. There is strict state-level regulation of fees and place availability, and a centralised admissions process is used to fill up places. Over the past couple of years, due to the indiscriminate expansion of capacity in private colleges, supply has outstripped demand and places remain vacant.

Moreover, the student-to-faculty ratio is set at 15:1 (or 10:1 in technical areas) and colleges have to pay academics a salary that is sufficient to attract the best talent – at a time when good teachers are an endangered species in India. Colleges must also have a world-class library and IT facilities, along with other necessary infrastructure.

Needless to say, tuition fees barely covers the salaries of teaching staff at the stipulated ratio. When an institute fails to get the allotted number of students, or state agencies fail to fill up places through the centralised admissions service, fees can’t even pay faculty salaries.

Effectively, this means that there is no functioning business model since colleges can never recover even their operational expenses. And when there is no sustainable business model even for non-profits, it is mainly the more dubious operations that are attracted to running colleges.

Often, there is indirect help from government to bail out troubled private sector companies in non-education sectors, where protecting stakeholders is of prime importance to the government. But when an educational institute fails, without any debt to any banks, students and faculty are affected rather than shareholders, and the government is not worried.

In India, the writing is on the wall – many educational institutes have a dire financial outlook. But there is no foreign direct investment mooted or any move to allow reputed global universities to set up campuses.

An MBA, in most Indian institutes of management, or IIMs – the premium government institutes for management – costs around Rs1 million (US$18,500) in tuition fees alone. And the capital expenditure per student in IIMs is much higher than for self-financing institutions. In IIMs and Indian institutes of technology, or IITs, capital expenditure was from government in the early years.

The combined costs for each graduate from IIMs and IITs are at least 10 times more than the costs of a student graduating from most self-financing institutions, which now produce nearly 80% of India’s engineers and MBAs.

There is a natural tendency to look at self-financing institutions with a jaundiced eye, which is partly justified because of the obvious short-term commercial gains many were cashing in on in the early years.

Even when one compares the standard state government colleges producing engineers and MBAs, and looks at the costs incurred versus the number of students produced, they are likely to be many times higher than those of private colleges.

In terms of quality of students, the IITs, IIMs, national institutes and state colleges get the best students because of their infrastructure, reputation, quality of faculties and costs. Self-financing institutions largely cater to the lower 80% of students at a fraction of the cost.

Private college quality

Given the above set of facts, what should one expect with regard to the quality of engineers and MBAs coming out of unassisted private colleges? It is not surprising that study after study shows that only 21% of their MBAs are employable, and that the vast majority of their engineering graduates are not employable.

One must congratulate the determined few students and the faculty at unassisted colleges who, in spite of all adversities, do well. If we measured the quality of students, costs incurred over the course of a programme and output quality of students, private players might appear more effective than many state-owned players, in terms of value added in quality and cost.

India’s neo-liberal economists recently started admitting that the trickle-down effect does not work in a nation like India, where poverty remains high. However, there is no denying that trickle down in higher education works.

If you want to produce high-quality engineers, MBAs, graduates and postgraduates, the first thing you have to do is hire the right quality of teachers. But in India this has become a chicken and egg story, as we do not have many good teachers.

Most government policies focus more on hard infrastructure (land, buildings, libraries and computers etc) than on soft infrastructure (primarily teaching quality).

The point is that a good soft infrastructure, in the age of the internet, can make up for the absence of hard infrastructure; however, hard infrastructure in the absence of good teachers is useless as well as being more expensive than investing in good teachers.

To produce an adequate number of teachers, government policies have aimed to produce a large number of PhDs. Today, some new-generation private universities have taken up this task, sensing both an economic opportunity and market demand.

But when institutions do not have good quality teachers, they are not in a position to mentor PhD scholars effectively. Government policies have dictated that teachers, irrespective of whether they are a good or bad researcher themselves, can supervise up to eight PhD students. While not all academics at top public institutions have eight research students, many staff from less reputed institutes or research backgrounds have eight students.

In most cases, students and mentors are not in regular contact. Following an assembly line process with no value added and with no focus on honing the student's skills as an independent researcher, a PhD is granted.

Although statistics are not available, it may be correct to say that a large number of students in India are pursuing PhDs through distance education, in state-owned or private universities. And these scholars fund their PhDs 100%.

My argument is that, irrespective of the bottleneck caused by the lack of teaching staff for PhD students, all institutions should focus on providing the highest level of quality control for PhD students.

It is assumed that significant numbers of PhD students will become academics. If the quality control of PhDs fails systematically, quality control in education will fail for generations because it is linked directly to the quality of PhDs we produce.

This has been the vicious cycle in Indian education. An academic, having gone through the academic rigour of a PhD, produces many other good PhDs, and many more masters-level and graduate students – who in turn are engaged in teaching secondary and primary level students, or in economic activities.

The cost of producing a PhD at an IIT or IIM is much higher than in private universities. There is no incentive given to scholars, who in many cases may have passed national level tests, to pursue a PhD in private universities.

Uneven playing field

The discrimination faced by private university students is everywhere. There is simply not a level playing field, despite the fact that these universities cater for 80% of students.

Indian policy-makers have become myopic, focused only on gross domestic product numbers, and this extends to education where they focus on enrolment proportions or the number of PhD students compared with China.

They have wrongly tried to apply trickle-down economic theory to improve the lifestyle of the underprivileged in India and have totally failed.

Had they applied this in higher education, by following China's example of nurturing a few universities with unlimited resources to bring them up to the standards of the best universities in the West; had India focused on the quality of the PhD students it produces rather than the quantity, it could have done much better than its current lacklustre performance.

That would mean giving private universities a level playing field. Focusing only on quality, without looking at costs that the different categories of institutes incur in producing graduates and postgraduates, is stupid. One can’t compare a Tata Nano with a BMW.

The government’s approach, of treating private players in higher education with suspicion, of not allowing reputed providers or foreign universities to enter the field as they do elsewhere, and of producing excessive regulation aimed only at private players – thus cutting off progressive growth – augurs badly for the next generation of teachers and students.

And this affects 80% of students pursuing higher education now, a number that has been rapidly growing. In banking, power, mining and other Indian industries, you don't see 80% of the input coming from private players. Because of pressure from private investors in these sectors, the government favours private players.

However, in higher education, private players are treated in a grossly unfavourable manner. Regulations largely apply only to self-financing institutes and the regulations often lack clarity because there are multiple regulators involved, including central and state level ones.

It would be nice to see if policy-makers from the state regulatory bodies were able to set up a private university, abiding by all the rules and directions of these various bodies, and produce quality end products, on a non-profit basis, while remaining commercially sustainable.

If they can’t, even on paper, they should have no right to make policies that determine the quality of higher education in such institutions. Unlike the economic trickle-down effect, in higher education it should be all about quality, and that does indeed trickle down from PhDs to primary education.

As agents of this trickle-down effect in higher education, private universities should be entitled to a share of taxpayers' money comparable to that enjoyed by state universities.

As has been observed in other areas of the economy, by ensuring an equal playing field and transparent policies, private sector players in education could prove that they are more efficient, productive and quality-focused than most state-owned universities.

If they are not, they will founder, as should state-owned universities who similarly fail.

* Professor Ranjit Goswami is director of the school of management at RK University, and is a graduate of the IIT system including masters and PhD.