primer on education sector in india 30 07 11
TRANSCRIPT
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Sameena Jahangir
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SCOPE
Facts
Segments
Legislative and regulatory framework
Investment structure
Regulatory issues Case study
Career Point
New Regulatory trends
Can listing be done
Will it remain as a charitable activity
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Facts - 1
Universities and Colleges*
*Ministry of HRD, Educational Statistics 2005-06
Central Universities 40
State Universities 243
Institution Deemed to be University 130
Institutions of National Importance 33
General Education colleges 11,698
Engg., Tech & Arch. Colleges 1,562
Medical (Allo/Ayur/Homeo/Unani) colleges 2,053
Teachers Training colleges 1,669Polytechnics colleges 1,274
Others colleges (Law,/Mgt./ MCA/ IT/Agri etc.) 2,513
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Facts - 2
Board of Intermediate Secondary Education 39
Pre-Degree Junior Colleges/Higher SecondarySchools 57404
High/Post Basic Schools 112165
Middle/ Sr. Basic Schools 305584
Primary/ Jr. Basic Schools 784852
Pre Primary/ Pre Basic Schools 60886
Schools*
*Annual report 2009-10, Department of School Education & Literacy, Department of Higher Education, Ministry of HRD
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Facts - 3
Annual government expenditure on education - $30 bn in 2006(3.7% of GDP)*
Annual private expenditure on education - $43.2 bn*
Entire education sector market size - $86.2 bn*
Investments by PE funds in companies in education sector(through 14 deals) - $1.68 bn
Literacy rates increase at a constant pace (1991 - 52.21%, 2005 -67.30%)
Number of listed companies in educational sector is more than 5(Aptech, NIIT, Educomp, Careerpoint, Everonn, Jetking etc.)
* Indian Education Sector Report, Kaizen PE
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Segments
Core
K-12
Higher Education
Parallel
Pre-schools/ Play schools Tutoring/ Tuitions
Test preparations
Vocational Training
Corporate Training
Ancillary
Multimedia & ICT Books and stationery
Teachers training
Management & ERP
Homework assistance
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Legislative and Regulatory framework
Constitution of India - Schedule VII
Entries in union list63 - Institutions at commencement of the Constitution64 - Institutions for Scientific/ Technical Education
65 - Unions Agencies and Institutions for(a) Professional/ vocational/ technical training(b) Promotion of Special Studies or research(c) Scientific or technical assistance in investigation or
detection of crime66 - Co-ordination and determination of standards in institutions for
higher education or research and scientific & technicalinstitutions.
Entry in concurrent list25 - Education, including Technical Education, Medical Education and
Universities (subject to Entries 63-66 of Union List), VocationalTraining and Technical Training of labour
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Legislative and Regulatory framework K-12
K-12 Education laws in the concerned States
Affiliation byelaws of the boards
Laws governing the form of the institution running the school
Education laws in the concerned States Widely vary across States - Andra Pradesh and Haryana requires
registration of all schools while Karnataka exempts CBSE / ICSEschools
Requires registration from state government/ NOC Governs the employment conditions
Regulates expenditure of schools Prescribes recognised institutions who can establish schools (mostly
NPOs)
Affiliation byelaws of the boards
Widely vary across boards CBSE/ ICSE/ IGCSE/IB/ State Board
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Legislative and Regulatory framework K-12
IB & IGCSE
The boards do not prescribe any particular form of entity which can runa school
The boards do not state that the school should be run as a community
service and do not commercialize it.
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Legislative and Regulatory framework
Higher Education Section 22 of the UGC Act, 1956 states that a degree can be granted
only by a recognised university (Central, State, Deemed or PrivateUniversity)
UGC as on today has notified 163 degrees including LLB, LLM, BA, MAB.Com, M.Com, B.Tech, M.Tech, MBBS, MBA etc.
Thus all higher education institutions granting degrees (i) should beaffiliated to a recognised university (in case of colleges) or (ii) shoulditself be a university (in case of deemed university and privateuniversity)
Institutions granting certain specified degrees have to be approvedcertain statutory bodies (B.Tech, MBA etc. by AICTE, MBBS by MCI etc.)
Laws governing higher education institutions
Rules, regulations, notifications by UGC
Rules, regulations, notifications by the concerned statutory body(AICTE, MCI, DCI, INC etc.)
Laws governing the form of the institution running the institution
Case laws SameenaJahangir
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Legislative and Regulatory framework
Higher Education
UGC
Provides grants
Promotes and co-ordinates the University Education
Determines standards of teaching, examination & research
Advises Central Governments and State Governments on HigherEducation
AICTE/ MCI/ DCI
Grants approval to colleges
Regulates the infrastructure requirement of the institution
Prescribes the curriculum/ qualification of teachers/ conduct of
examination Prescribes the fund position/corpus of the entity
Regulates the admission procedure
Regulates the intake of the students
Prescribes the eligibility criteria for the students
AICTE regulates the fees
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Legislative and Regulatory framework
Supreme Court cases
Case Laws
TMA Pai Foundation Case - Private educational institutions have afundamental right to administer themselves
P.A. Inamdar & Ors vs State of Maharashtra & Ors Case Prohibition ofcapitation fees
Unni Krishnan, J.P. & Ors. v. State of Andhra Pradesh & Ors. UnniKrishnan Scheme for fee fixation
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Legislative and Regulatory framework
Parallel & Ancillary
In parallel segment tutorials are regulated by state laws.
Thus coaching institutions, test preparation centres, other trainingcentres are regulated.
Requires registration in states like Kerala, Karnataka, Andra Pradeash
etc. (Kerala Municipality (Registration of Tutorial Institutions) Rules,1999, Andra Pradesh Education Act, 1982 etc.)
However the form of the entity which can establish tutorials is notprescribed
There are no regulations to the effect that these institutions should runfor non-profit motive.
Multimedia & ICT, books and stationery, home work assistance etc. are
not regulated by any sector specific laws.
Management services agreement is tricky as boards require themanagement vested with the trust/society.
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Regulatory challenges
Only NPOs are allowed to run K-12 and Higher Educationinstitutions
Trustees cannot benefit from trust
Restrictions on the services which can be outsourced (in thecontext management services agreement)
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Investment Structure in K-12 and Higher
Education Option 1
Management services agreement
100% FDI allowed in automatic sector
Usually the management fees of the Management Co. is linked to thetotal revenue generated by the School/ College
Management services include determining/ designing curriculum,
determining fees, appointing teachers, promoting Schools/ Colleges,management of infrastructure, assisting in procuring regulatoryapprovals, non-academic services etc.
Separate branding agreement entered into between the ManagementCompany and trust/ society in most cases.
Ex: Manipal School Services Private Limited Model
Investor (Foreign/ Domestic)
Management CompanyInstitution operating the school, college
(society, trust etc.)
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Investment Structure in K-12 and Higher
Education Option 2
* May attract FDI restrictions if the Company into real estate development
Management services agreement &
Lease agreement
This structure is suited for IB/ Cambridge schools where theinfrastructure can be taken on lease from a third party.
Provides additional source of revenue for the Company
Examples: DYP Model for IB School
Investor (Foreign/ Domestic)
Management Company& Property Company*
Institution operating the school, college(society, trust etc.)
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Investment Structure in K-12 and Higher
Education Option 3
Management Lease Agreement
Services
Agreement
Investor (Foreign/ Domestic)
Management Company Property Company
Institution operating the school, college(society, trust etc.)
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Investment Structure - Others
Ex: Educomp, Career Point etc.
Investor (Foreign/ Domestic)
Company providing paralleland ancillary services
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Types of NPOsDescription Society Section 25
companyPrivate trust Public Trust
Legislation The SocietiesRegistration
Act 1860Indian
Companies
Act,1956
The Indian trustAct 1882 General law ofthe state
MinimumMembers
7 Private:2
Public:7
1 2
registration Registrar ofsocieties:
charitycommissioner
Registrar ofCompanies
CharityCommissioner
CharityCommissioner
Constitutivedocument
Memorandumof association
Memorandum ofassociation
Deed of trust Deed of trust
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Case study X Structure
X COMPANY(Prop Co.+ Man Co.)
Trust 2Trust 1Deemed University Society
DepartmentOf
Management
DepartmentOfBio-
technology IB 1school
IB 2School
IB 3School
X-DC(certificate
course)
Settlor of the trustO&M Agreement
O&M Agreement
IB 4School
PE Investor
Offshore
OnshoreOR
Lease Agreement
Management
Colleges
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PE Investor
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Case study New regulatory trends The new Deemed universities regulation, 2010 provide for stricter norms
for the regulation of the deemed universities.
The Right of Children to Free and Compulsory Education Act, 2009requires schools (aided and unaided) to provide for free and compulsory
education.
The Educational Tribunals Bill, 2010 seeks to provide for theestablishment of educational tribunals at the national and state levels toexpedite adjudication of disputes in the education sector.
The Foreign Educational Institutions (Regulation of Entry and Operations)Bill, 2010 seeks to regulate the entry and operation of Foreign EducationalInstitutions seeking to impart higher education in India.
The Prohibition of Unfair Practice in Technical Educational Institutions,Medical Educational Institutions and University Bill, 2010 seeks to providefor prohibition of unfair practices in the in the technical and medicaleducational institutions.
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Case study Career Point Infosystems
Limited
Parallel Sector
Tutorial services to students for entrance examinations including IIT-JEE and All India Pre-Medical and Pre-Dental Test
Tutorial services are provided through our classroom training
programmes conducted through a network of company operated andfranchisee centres
Ancillary Sector
Education consultancy and management services (catering to K-12 andHigher Education segments.
ICT - technology enabled education delivery platform for deliveringcontent through TechEdge Class.
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Can listing be done?
Companies which are into parallel and ancillary segments canbe listed
However the strict regulations are in pipeline.
We cannot risk the career of students to the fortune of
stock market. We cannot allow profit going back to theshare holders as dividend Kapil Sibal
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Will it remain as a charitable activity?
Let us be clear that Indian businessmen, who probably
because of meltdown do not get profit anywhere, want toget profit out of education. I, as a minister, will stand as arock to ensure it does not happen. Kapil Sibal
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Questions?
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Thank YouSameena Jahangir
Mumbai - 400 030India
Contact 022 40041017
SameenaJahangir