[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

REIMAGINING INDIA
the best education for their children.
One possibility would be for investors
to assist expansion-minded proprietors
accessing loan capital. Or it could involve
creating a specialised education
investment fund, to provide equity to
education companies that run chains
of budget private schools. Suitable exit
strategies could be worked out for the
investment fund, perhaps by giving advice
on how to list on local stock markets,
or to get other investors on board.
A further possibility could involve investors
engaging in a joint venture with
local educational entrepreneurs to set
up a chain themselves. Investment in
initial R&D would be required, to create
the standards for a demonstrable
and truly replicable model of private
education for the poor. But here’s the
rub: although it is possible to envisage
creating chains of private schools here
in India as things stand now, the regulatory
environment certainly doesn’t
make life easy for investors and innovators.
The problem is profit. It all
seems to go back to the Unnikrishnan
Supreme Court Judgement of 1993
(Unnikrishnan vs. State of Andhra
Pradesh., 1993, in Padala Rama Reddi
(1993) The Andhra Pradesh Education
Code, Hyderabad, pp. 399-400). The
judgement reads: ‘Education has never
been commerce in this country. Making
it one is opposed to the ethos, tradition
and sensibilities of this nation.’
Moreover, ‘Commercialisation of education
cannot and should not be permitted
… Both in the light of our tradition
and from the standpoint of interest
of general public, commercialisation is
positively harmful, it is opposed to
public policy.’
It’s hard to read these statements
now in the light of the activities of successful
businesses such as NIIT and
Aptech and think that they make much
Although it is possible to envisage creating chains of private
schools here in India as things stand now, the regulatory
environment certainly doesn’t make life easy for investors
and innovators.The problem is profi t
sense. These certainly are commercial
companies, and their business is clearly
education. So they seem to show
that, in point of fact, there is a very fine
Indian ethos and tradition of the ‘business
of education’. Usefully, the Unnikrishnan
judgement was partially
revoked in 2002. In the Supreme Court
on October 31 st 2002 (TMA Pai Foundation
versus State of Karnataka), it
was pointed out that it is ‘no secret that
the examination results at all levels of
unaided private schools, notwithstanding
the stringent regulations of the governmental
authorities, are far superior
to the results of the government-maintained
schools’ (Para 61, p. 40). So
clearly, the judgement said, Unni
Krishnan needs reconsideration if it is
having a dampening effect on private
education entrepreneurs. However,
did this reconsideration mean that Unnikrishnan’s
rejection of profit is also
superseded? It is not clear to me. The
new judgement reads: in ‘setting up a
reasonable fee structure, the element
of profiteering is not as yet accepted in
Indian conditions’ (Para. 53, p. 34).
However, ‘Reasonable surplus to meet
cost of expansion and augmentation of
facilities does not, however amount to
profiteering’ (p. 128). Does this allow
for-profit education? Or not? It seems
that it may still be a grey area – and
grey areas like this can breed corruption
and inefficiency. To make matters
worse, the sentiments behind Unnikrishnan
are there in the regulations
of the examination boards. The CBSE
for instance says that only schools that
are run ‘as a community service and
not as a business’ are able to be affiliated
to the board. And they are there
in many state regulations too, that only
allow schools to be registered if they
are run by non-profit educational societies
or trusts, but not by companies.
All this means that if investors want
to invest in education, it’s not straightforward.
Of course it’s possible. Forprofit
companies can contract with
educational societies and trusts to provide
management and educational inputs.
But these means are cumbersome,
open to regulatory risk, and in
any case obtuse: for the regulations
want to protect us from something that
in other areas of our lives seems whol-
84 THE IIPM THINK TANK