Loan scheme will fund world-class research facilities

An ambitious new initiative unveiled in India’s budget for the fiscal year 2018-19 will do away with annual grants for India’s top centrally-run higher education institutions, replacing them with repayable loans.

The new funding model, Revitalising Infrastructure and Systems in Education (RISE), will enable research institutions to modernise, build world-class laboratories, research centres and other facilities that will improve research and help push them up international rankings.

The budget proposals passed by the Lok Sabha or lower house of parliament on 15 March apply to the 2018 fiscal year beginning 1 April. Unveiling the proposals on 1 February, India’s finance minister, Arun Jaitley, said the new funding system would see investments worth US$15.3 billion per year over the next four years in “research and related infrastructure in premier educational institutions, including health institutions”.

The lion’s share of the funds or about US$38.5 billion is earmarked for the 23 Indian Institutes of Technology or IITs for capital funding projects such as improving dilapidated buildings and equipping labs. Salaries for faculty will continue to be paid out of government grants.

Others eligible to tap into the RISE fund include the Indian Institutes of Management, the National Institutes of Technology, the Indian Institutes of Science Education and Research and centrally-funded universities.

IIT Bombay in Mumbai has said it is seeking millions in funding for major increases in staff and student accommodation, construction of buildings to house three departments and a new research park. Others are planning to build research centres that would enable more collaborations and consultancy work with industry.

RISE will be managed by the Higher Education Financing Agency (HEFA) set up last year to mobilise resources from the financial markets to improve institutional infrastructure.

The expectation is that this will boost research and innovation by making more funds available while improving accountability, ensuring that funds are used for genuine, worthwhile research amid complaints that much research, including technology research, is rarely useful commercially.

Cut in grant aid

While higher education institutions previously received fixed annual grants from government for research each year, they are now required to finance projects by borrowing interest-free from the RISE corpus to be paid back over 10 years.

While this means substantially more money for investment – up to 10 times more available to some institutions for capital spending compared to the previous grant system – it is accompanied by a 20% cut in other government grant aid to IITs.

“The plan is to get higher education institutions to raise their own money and pay back loans taken from HEFA by generating income from research projects,” says Amitabha Bandyopadhyay, a professor of bioengineering at IIT Kanpur.

On average, if an institution can ringfence US$15 million for research proposals from internal funds or ‘internal accruals’ such as fees, it can obtain HEFA approval for a project worth US$1 billion, “as long as it can guarantee returns of US$100 million every year for the next 10 years with the government taking care of the interest,” Bandyopadhyay explains.

“In short, we are being thrown to the markets and this is a new experience for both institutes and researchers,” says Bandyopadhyay. “Taking money from ‘internal accruals’ could mean hiking student fees and this could have consequences at a time when research is not attracting the best talent.”

Central universities will only need to repay 10% of the principal amount from their own resources, while the remainder as well as interest will be covered by HEFA.

Technical institutes set up between 2008 and 2014 will pay back 25% of the principal amount with the balance and loan interest to be taken care of by HEFA, which will be tapping funds available through corporate social responsibility.

IIT heads met with India’s president earlier this month to point out that generating the required funds to cover the 20% cut in grants and pay back the 10-year loans would be difficult, and has raised fears that institutions would need to raise fees, including at subsidised canteens and other facilities in order to pay back the loans.

Stepping up research

However there has been some scepticism that research standards can be raised simply via additional money. There are also few opportunities for institutions to raise other funds from philanthropy or industry. “Industrial growth has been stagnant for years and there is very little demand for research from local industry,” Bandyopadhyay noted.

There are also serious issues around governance of IITs, including political interference, and which will require remedial action in order to step up research quality, he says.

Whether it will increase research is also disputed as “only about 5% of IIT students show any interest in going in for PhD [studies], even with the new incentives”, according to Bandyopadhyay.

“The only reason that the plan has any chance of working out is because fewer IIT graduates are now leaving for the US because of tighter immigration rules,” Bandyopadhyay says. “In any case the results in terms of better research and better faculty will show up only after four or five years.”

Faculty shortages at IITs have contributed to a decline in academic standards over the years. In February 2017, the Parliamentary Standing Committee on Human Resource Development recommended drastic steps to fill vacancies of over 40% in several of the IITs, including Delhi, Kharagpur, Roorkee and Varanasi.

In its report to parliament, the committee said: "There can be only two possibilities, either our young students are not attracted towards the teaching profession or the recruitment process is a prolonged one and involves too many procedural formalities.”

Under the budget proposals, around 1,000 students from the IITs and other top institutes are to be awarded research fellowships worth US$1,153 per month for five years to address the serious shortage of faculty in these institutions.