Why are 2 lakh MBA seats in the country not finding any takers Ditto for an equal, if not larger number of seats in engineering colleges across India. That, in a nutshell, is the logic behind the hunar hai to kadar hai (you will be respected if you have a skill) tagline of the R40-50 crore ad blitz the National Skills Development Corporation (NSDC) has got ready to glorify the idea of vocational skilling, NSDC chief Dilip Chenoy tells me over a breast of chicken at New Delhis IIC.
Chenoy is running late, caught up, he tells me later, in a meeting of the Nehru Yuvak Kendra Sangathan to discuss the skilling being done by one of NSDCs training partners in ManipurNYKS gives a scholarship for kids for 2 years to run youth clubs across the country and wanted skilling for them in the last few months to make them job-ready, once the R3,000 per month scholarship is over. Given that one of the issues raised was why cane chairs were not being used in the training centres in the Northeast instead of plastic ones, presumably that means the meeting went off well!
Though one hears a viable skilling model has yet to be arrived atindeed we have the authority of the Boston Consulting Group to say so! (http://www.financialexpress.com/news/column-making-skilling-viable-is-the-key/875387/0)Chenoy remains optimistic. It is a challenge, he says, but it looks as if he may achieve his target. Over 20,000 persons got skilled in 2010-11 and 50,000 in the first half of this year, so the way the scaling up is happening But is the model viable, I insist, since students are unwilling to pay and banks to give them loans If the cost of a retail training programme is R20,000 and the first salary a retail executive can get only R4,000, why would he want to pay for training And, if not, how can a training company be viable An additional problem relates to where the skilling is required and where the jobs are. The kids are in rural India if you want to get a decent level of numbers, but the jobs are in urban areas by and largegiven the higher costs associated with migrating and living independently in a city, the cost-benefit to a student is not high, at least in the initial years that matter.
Chenoy admits it is a challenge to ensure the viability of training partnershe has 36 of them alreadyand unless that happens, the entire programme goes for a toss. But he makes a few points that help keep the morale up. For one, once companies scale up, the costs go down by around 40-50% so if you need to charge a student 5 months salary with one centre, this can go down to around 3 months salary if you have 3-4 centres. Two, banks are giving student loans and NSDC has worked out a model to deal with precisely this problem.
We juggle with the soupmulligatawny for him and chicken sweet corn for meand the garlic bread while Chenoy takes me through the maths. Its either him or I, or the fact that doing numbers over lunch is not a great idea, so I dont get the finer details of how the model works as it involves the probability of the student defaulting and the training company doing some top-ups, but the long and short of it is that NSDC gives what it calls the First Loss Default Guarantee to the bankit has already signed up with Central Bank of India for this and for every R100 crore it gives, the bank can give R4,000 crore of student loans at PLR+2%. Seems great, but given that the model hinges on the actual levels of default, not the one NSDC and the banks have assumed, its a good idea to wait and watch. The way the model is supposed to work, if a course costs R20,000 to deliver, the student will pay R2,000 upfront and will get a bank loan for the restwith a four-way agreement signed by the student, the training company, the hiring company and the bank, the loan has to be deducted from the salary.
Since NSDC allowed a moratorium for interest payments on the loans given by it, and that window gets exhausted by next year, I ask Chenoy as hes slicing his chicken, whether well see the first wave of defaults soon. Not really, he smiles, and rattles off names of training partners who have already begun paying back their instalments9 of the 19 that are operational fall in this category. He talks of how corporates are now realising that skilling of the general population is good for their business and are now contacting his training partners for precisely this. Eureka Forbes, to cite one example, gave free cleaning equipment to one of them to train people on. One of the cleaning firms who use Eureka Forbes products called up the training company to work out a long-term relationship for sourcing trained employeeswhen the training firm asked for a R4,500 placement fee (to be able to meet part of its training expenses), the cleaning firm offered a fraction of this; Chenoy advised the trainer to reject the offer and, lo and behold, a better one was made; after two rounds of this, a more suitable fee has been negotiated! Godrej, Chenoy gives another example, has given one of his training associates several models of washing machines and air conditioners to train people on and has promised that its dealers will give top priority to hiring the trained manpower.
What would you doI change tack since Chenoy refuses to admit to the slightest flaw in the model!if you had to do it all over again Is there anything youd change Id have looked at ways to address the payment gap, he says. If any training programme costs more than the first 2-3 months of salary, he says, you have a problem. Thats where the bank loans and leveraging of the First Loss Default Guarantee come inin other words, NSDC is taking its learnings seriously. The other problem, he says, is that industry is willing to hire unskilled people and train them instead of paying for hiring skilled personsthis has to do with the large number of available people and the fact that, since attrition levels are very high (similar to BPOs, one of Chenoys training partners tells me at an NSDC partners meet a few days ago), companies dont want to invest in trained people. Which is why, Chenoy says, hes now forming Sector Skill Development Councils whose job is to approve curriculums for training and ensure the training partners for an industry vertical are delivering the right valuethey also offer to give first priority to those people trained by NSDC training partners.
Despite this, the model may not be fully successfulone of the training partners told me the real pain point was to get the requisite number of students who need skilling (theres a big business opportunity here!) and, after that, to ensure they actually take up the jobs and, most important, stay on the job for 6 months to a yearthe biggest tranche of money gets paid when the students have been with the company for a certain period of time. In which case, Chenoy may not be able to deliver on his stated goal, of returning the government the R1,000 crore-odd it plans to give NSDC for skilling 55 million people. But given the fact that the existing education programme isnt doing that well eitherlook at the extraordinary high proportion of graduates who are unemployable and in urgent need of repair to use Teamleases Manish Sabharwals rather inelegant phraseNSDC or some equivalent of it is the best shot we have at making India job-ready. So if the skilling gets done and is viable, a few thousand crore on NSDC eventually may not be a bad investment.
Which, we discuss, is what happens in Singapore, perhaps the most successful example of vocational education, since the government bears all costs and the skilling is free. Theres something more important, Chenoy says as we tuck into our caramel custard, and thats to do with the fact that vocational education isnt looked down upon in Singapore. Why Singapore, he says, has a limited number of seats for formal education, so like it or not, students who dont get in here have to opt for vocational education in India, by contrast, with the mushrooming of MBA/Engineering institutes, parents prefer their children getting a proper education, even if not in the best of colleges. Hence the hunar hai campaign he hopes to launch soonthe idea is to convince parents that vocational training which results in jobs is better than a formal education that doesnt end in a job (thats why the MBA/engineering seats are going abegging). In the future, he says, a share of the skilling budget will be earmarked for campaigns to give vocational education a good name. Sar utha ke jiyo!