Plan to fund education infrastructure via loans may lead to higher fees in IITs, central varsities

Last year, students of the Indian Institutes of Technology protested the government’s decision to more than double the annual tuition fee for new undergraduate candidates from Rs 90,000 to Rs 2 lakhs. It now seems another fee hike may be on the anvil.

On February 9, the Ministry of Human Resource Development signed a memorandum of understanding with Canara Bank to set up a finance company with the objective of raising funds to facilitate infrastructure expansion in higher education. Within a few weeks, the Higher Education Finance Agency will be registered as a non-profit non-banking finance company whose main job, as a ministry official overseeing the project put it, would be “mobilising funds from the market”. Through it, private companies would invest in laboratories, hostels, libraries and lecture halls in public educational institutions – a radical departure from the current system of the institutions receiving plan grants from the government.

All centrally-funded institutions, including the IITs and central universities, are being encouraged to draw 10-year loans from the agency to finance their expansion instead of looking to the government for grants. The agency will reportedly start lending from May-June. “Notes have gone to the IITs’ finance committees telling them this [the amount of their current allocation] is all they will get from the government and how much they can mobilise from the HEFA [the agency],” said the official. The central universities, funded through the University Grants Commission, will also be formally informed soon.

But students like Swati Agarwal from IIT-Benares Hindu University and Dev Kedia Azad from IIT-Kharagpur fear that this will drive educational institutions to hike fees further to repay the loan. “Fees will treble if institutions have to take loans instead of getting grants,” Agarwal, who was part of last year’s protests, said.

Although the finance company will function independent of the University Grants Commission – which funds the country’s 40 central universities and many of their colleges – teachers at institutions in the Capital such as Delhi University and Jawaharlal Nehru University also expect significant hikes. “If you needed infrastructure, you sought a grant,” said Abha Dev Habib, former executive council member of Delhi University. “The concept of borrowing was not there.”

They expressed concern about the impact such a change in the mode of funding would have on fees, research and even the careers of students.

Zero risk for companies

To be eligible to receive loans from the agency, an institution will have to escrow or commit to it a fixed amount from its income at the beginning. The credit limit available will depend on this amount. The agency – set up with a capital of Rs 2,000 crores from the ministry and the bank – will, in turn, attract private parties to invest. From this pool, loans will be offered.

“It offers a zero-risk investment for the private parties,” said the official. “It is backed by an escrowed amount and is in a sector like education.”

As for repayment, the government will pay the interest on the loan but not the principal amount.

Such a mode of investment in public institutions has been seen in infrastructure projects such as toll roads, but not so far in the health and education sectors.

Internal earnings

The ministry official conceded there were some limitations to the funding plan. And these have been found to be directly linked to concerns about fees. First, the infrastructure added – say, a hostel – is not likely to make profits like a toll road would. Second, he said, institutions “need robust internal earnings”.

Asked if even the IITs make enough in a year for the loan route to work, Dheeraj Sanghi, who was dean, academics, at IIT-Kanpur till last year, stated categorically, “Absolutely not.” He explained why “taking away tuition money” to pay off loans is not feasible. “The non-plan amount is always sufficient for salaries and pensions,” he said. “But there are dozens of other bills – security, gardening, water charges – for which we dip into income from tuition. Last year, the electricity bill was Rs 30 crores and had to be paid, in part, from tuition. Paying infrastructure loans from that will not be possible.”

Sanghi, who is now dean, academics, at the Indraprastha Institute of Information Technology Delhi, pointed out that the IITs have in the past been granted loans from agencies like the World Bank, but these were “always paid back by the government”.

A senior official at IIT-Delhi sounded sceptical too. “Will we be allowed to differentially charge fees from students?” he asked, requesting anonymity as he had not yet “seen the terms and conditions”.

Last year’s fee hike had pushed many students, including Swati Agarwal’s younger brother, to take loans for their admission, but it did not help the institutions they joined. “Just 40% of our students are undergraduates and there were so many concessions that any effect on IIT-Delhi’s income was neutralised,” said the official.

“Borrowing means, over a period of time, the cost will be recovered from students,” argued Abha Dev Habib, formerly with Delhi University. “Already, there are wide disparities in Delhi University. Some colleges that have added infrastructure or facilities charge almost double what other students pay. This will increase and impede access to education. Establishing laboratories or starting programmes will become even more difficult for us.”

Withdrawal of funds?

Expressing their opposition to the loan plan, the teacher-student community also accused the government of “withdrawing funds” from higher education, while the ministry official conceded that the sector “has not grown as it should have”.

Over 2015-2016 and 2016-2017, plan allocations for infrastructure to central universities funded through the University Grants Commission stood at Rs 2,000 crores and Rs 1,870 crores, respectively. During this period, the number of central universities increased from 39 to 40.

At the Jawaharlal Nehru University, for instance, the per-student cost comes to about Rs 2.3 lakhs a year, according to the institute’s fact-sheet. Of that amount, the government only recovers a few hundreds in tuition fees each year and a few thousands in other bills.

The government allocation for 16 IITs was Rs 2,000 crores and Rs 2,625 crores in 2015-2016 and 2016-2017, respectively, though the actual amount released, at least in the first year, was less than what was committed. This despite the pressure on the institutions to become “world-class”.

Rs 12 lakh package

Presenting the other side of the picture, the ministry official said that the annual per-student cost in the IITs is between Rs 6 lakhs and Rs 6.5 lakhs. The government recovers about a third of that amount in fees. On the other hand, he added, “Very few students get packages of less than Rs 12 lakhs when they leave.”

His remarks hark back to a long-standing debate: should the IITs be subsidised at all or should they find ways to finance themselves?

Students from three IITs – Delhi, Kharagpur and Benares Hindu University, Varanasi – vehemently disagreed with this line of thought. “I do not think even half the students appearing for placements get packages of Rs 12 lakhs,” said third-year student Dev Kedia Azad. “The Rs 1 crore deals a few get increase the average drastically and leave a wrong impression.”

Swati Agarwal, also in her third year, concurred: “For some departments, compensation packages of Rs 3 lakhs to Rs 7 lakhs is the norm.”

And as Nimish Joseph, a PhD scholar at IIT-Delhi’s Department of Management Studies, reminded, “Many students now leave institutions already in debt.”

A fee hike to pay off an institution’s loan, Joseph contended, will eventually translate into loan burden for students. And loans influence career decisions even beyond college.

Agarwal said her father could afford her Rs 50,000-per-semester fee but not the Rs 1 lakh a semester for her brother, who joined IIT-Kanpur last year after the fee hike. “He will leave college with a Rs 10-lakh loan hanging over his head,” she said.

Joseph said, “They prevent people from joining research, often forcing them to accept whatever job comes their way.” This is the reason why “so many are keen to find opportunities abroad”, he added.

Another factor to take into consideration in this debate is that any increase in fees in public institutions will benefit private ones.

“I have friends who picked lower-ranking IITs instead of the higher-ranked Birla Institute of Technology-Pilani, only because the fee was low,” said Azad. “If that rises, the numbers at IITs will drop along with the quality of students.”

Joseph also expressed concern about private-funded research. There is talk that the agency may offer research grants too – not loans – and that those would in all probability come from contributions under corporate social responsibility. The official, however, pointed out that such grants were “still a concept”.

Corrections and clarifications: An earlier version of the story erroneously introduced Dheeraj Sanghi as a professor at the Indian Institute of Information Technology-Delhi. The name of the institution is the Indraprastha Institute of Information Technology-Delhi.