Foreign funds fight shy of Indian classrooms

Written by Kirtika Suneja | New Delhi | Updated: Dec 29 2011, 19:19pm hrs
Over a decade after it was opened to foreign direct investment (FDI), barely R2,000 crore has entered the education sector, thanks to its not-for-profit status and stalled legislation to let foreign universities open local campuses. About three-quarters of this investment amounting to R1,600 crore has come from entities in Mauritius, a tax haven.

With Indias rules mandating that core education cannot be a commercial enterprise, companies involved in businesses related to education have attracted all the foreign investment. These include entities specialising in training, technology and research services like TutorVista, Educomp Solutions, Career Launcher, Manipal Universal Learning and Triumphant Institute of Management.

FDI has stayed away because formal schooling and higher education, which form the largest part of Indias education sector, are mandated as not-for-profit. Otherwise the $40-billion industry would have attracted a lot more investment. In all other aspects, including percentage of spend of earnings on education, India is among the best in the world, said Srikanth B Iyer, chief operating officer of Pearson Education Services, which owns TutorVista.

Though the sector is ready for FDI, enabling legislation isn't. The Parliament is yet to clear the Foreign Educational Institutions Bill, which would allow overseas universities to set up campuses here. Almost two years after the ministry of human resource development drafted the Bill, Parliament's standing committee has not given its nod.

A ministry official agreed: Foreign investment peaked in 2008-09 and has been falling since. The main reason is the sector's not-for-profit status. There is no enabling legislation either. How can a foreign university wishing to set up a campus here get approvals without the legislation in place

The last Union Budget allocated just Rs 8,675 crore ($2 billion) to universities. As a result, large universities like Delhi, Mumbai and Osmania with huge student populations are running short of funds.

Education services companies too have pegged hopes on the Foreign Educational Institutions Bill and expect greater FDI once foreign entities start setting up campuses. India trails BRIC (Brazil, Russia, India and China) countries in foreign investment. The government must take steps to attract capital, said Shantanu Prakash, chairman and managing director of Educomp, which attracted FDI worth Rs 93 crore in its education, scientific and research services.

The regulatory environment is uncertain. Most of the investment will come only into a campus set-up. So far, the investment has been in training and technology, but both have not been explored completely. Besides, investments are minimal due to lack of clarity, said Shobha Mishra Ghosh, director of Ficci's education committee.

However, Manipal Education, the biggest recipient of FDI in education at almost Rs 11,110 crore, is sceptical on betting big on the Foreign Education Bill. Said CEO Anand Sudarshan: Even if the Bill is in place, we will need institutes of good standing to invest in the country. Besides, where will all the investment go Training, technology services and coaching are peripheral services. Until the education structure is changed to for-profit, it would be difficult to invite investment.