A few recent moves in education public policy, though driven by honourable intentions, don?t recognise how quantity leads to quality. Putting ?deemed universities? on notice has not only created a long-drawn court battle but has also created a sharp arrow in the quiver of many state education ministers to demand ransom from all institutions. Crackpot regulators like AICTE are fining Manipal for taking 173 MBA students of the 7,830 applications instead of the 120 ?sanctioned?. Consistent with AICTE?s Ayatollah instincts, they have issued a fatwa that caps every new engineering college to 540 students. More dangerously, it specifies 60 students per discipline. Does AICTE really believe that all these disciplines have equal demand? Do they have a secret model to predict job creation demand that nobody in the private sector does? To compound the damage, older engineering colleges with higher student numbers have been prohibited to increase numbers beyond what they are currently admitting, even if they are willing to invest in infrastructure and faculty. So, we are back to the licence raj rather than encouraging competition.
But there are early signs of something wonderful in education. Employers like us are getting a flood of meeting requests from college managements desperate to improve placements. The adverse selection among education entrepreneurs because of the regulatory cholesterol in education becomes obvious in these meetings?most are with land mafia, criminals or politicians. For most of them, a college or school has been a piece of land with an ATM machine on it. But, thankfully, this ATM has started malfunctioning, and showing up it is no longer good enough. This year there are more than 100 engineering colleges in South India that received less than 10 admissions. The coaching mandi business in Kanpur fell by 40% because of the 65,000 seats of the UP Technical University. Marketing seminars for school principals on ?how to get admissions? are shockingly not only being held but are completely sold out. Many of the 1,200-plus MBA schools certified by AICTE are reporting high unwillingness of students to pay the ?rack rate? fees. In other words, institutions are starting to think about differentiation and becoming creative in their messaging if not in reality; ragging-free campuses, faculty ratios, faculty qualifications, infrastructure, openness to parent involvement, soft skills and spoken English curriculum, employer outreach, deferred fees and much else.
More importantly, many school and college ?trustees? are making a clinical calculation about their ability to generate revenue relative to embedded asset values. The obvious consequence of this calculation is the realisation that running a school is different from owning one and that many of these institutions may be worth more dead than alive, that is, the real estate assets must be deployed better or liquidated. The ?deployed better thought world? is leading them to sign management contracts or lease their premises to professional educational groups. But many of them are realising that they are better off liquidating or monetising their land values and there is a huge advice industry springing up on how to create this tunnel, given the complications of trust structures. But we must not forget that many of these are individuals who spent their lives figuring out how to gift-wrap a for-profit business as a not-for-profit charity. So, surely they will figure out ways to take their money out. And this is not a bad thing; it will dry the swamp and eliminate the adverse selection among education entrepreneurs. It will attract long-term capital from institutions that are not playing a one-innings game.
The potential policy implications of these trends are clear; the new Education Regulatory Authority must recognise that quantity is finally starting to drive quality out. It must accelerate this trend by rapidly lowering the entry barriers and licence raj that has hindered competition and made students hostages, not clients. This lowering of entry barriers must be accompanied by a one-time window during which existing managements could transfer control of trusts, migrate to Sec-25 companies, exit the business or, under specific circumstances, consider for-profit incorporation. Fundamentally, we must move away from education regulatory micromanaging student capacity and be patient during the five years that it will take for quality and differentiation to develop.
The unfortunate reality in India is that the most important decision a child makes is to choose his or her parents wisely. The only sustainable way to sabotage this ovarian lottery is a Cambrian explosion of education entrepreneurship. But education entrepreneurship, like all entrepreneurship and science, is hypothesis testing?you can?t prove anything right but need to prove it wrong. So, the best way to take on the impossible trinity of cost, quality and scale in education is to encourage biodiversity of business and operating models in education. This requires a number of statistically independent tries with different DNA; not-for-profit, not-for-loss, for-lower profit, and for-normal profit. In the final analysis, the most expensive school is no school. And a bad school is better than no school. And this is why education public policy must make the painful-in-short-run choice of quantity over quality.
The author is chairman, Teamlease Services
