Foreign varsities get independent access to India

Oct 3, 2013 by

Source: Live Mint and the Wall Street Journal

Foreign universities can now set up campuses and offer degrees in India without having a local partner.

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Currently, a foreign university needs to join hands with a local education provider to offer courses in India and the degrees are not considered foreign degrees. Photo: Bloomberg

New Delhi: The government has decided to allow foreign universities to operate independently in India, set up campuses and offer degrees without having a local partner—a move that finally opens the gates for foreign educational institutions seeking to establish a presence in the country.

 

To foreign universities, the move presents an opportunity to tap a country with a population of 1.2 billion. To Indians (at least those who can afford it), it is an opportunity to receive quality education without leaving India (and without paying in dollars). And to India, it could mean significant foreign direct investment.

 

The department of industrial policy and promotion (DIPP) and the department of economic affairs (DEA) have agreed to allow overseas universities to operate as so-called Section 25 or non-profit companies under the newly passed Companies Act, the human resource development (HRD) ministry said on Tuesday.

 

Companies registered under Section 25 of India’s Companies Act cannot distribute profit or dividends to members, which means that the foreign universities cannot repatriate money—a constraint that was criticised by at least one expert.

 

Several foreign universities have been keen to enter India to tap a higher educational market that is worth Rs.46,200 crore and expanding by 18% every year, according to 40 million by 2020, a report from audit and consulting firm EY. They have been constrained by the need to do so through partnerships.

 

The Foreign Education Providers’ Bill is still awaiting parliamentary approval. Tuesday’s announcement, which is effectively an executive order, doesn’t need to be approved by Parliament and could see a rush of foreign universities to enter India.

 

“The ministry had sought comments and observations of the department of industrial policy and promotion and the department of economic affairs on the rules. Both DIPP and DEA have supported the proposal,” the HRD ministry said in a statement on Tuesday.

 

Ministry officials said that the details are being vetted by the law ministry and an official notification will be published soon.

 

With the powers vested in it through the University Grants Commission (UGC) Act, the ministry will allow foreign universities to set up campuses in India and award foreign degrees. Currently, a foreign university needs to join hands with a local education provider to offer courses and the degrees are not considered foreign degrees.

 

Under the proposed rules, foreign universities can set up campuses in India once they have been notified as ‘foreign education provider’ by UGC. An educational institution wishing to operate in India needs to be in the top 400 in one of three global rankings: the UK-based Times Higher Education Ranking; Quacquarelli Symonds ranking published in UK again; and the China-based Shanghai Jiao Tong University rankings.

 

An HRD ministry official said that at least 20 foreign universities—mostly from US, followed by Australia and Canada—have expressed their desire to enter the market.

 

“Universities such as Duke University, California Institute of Technology (Caltech) and VirginiaTech are some of the names that have shown interest,” said the official, who asked not to be identified.

 

Mint could not independently verify this. In September 2012, the University of Chicago Booth School of Business’ deputy dean Robert H. Gertner told Mint that the school was exploring opportunities to open an executive education centre in India.

 

The degrees awarded by foreign universities in India will be considered foreign degrees and students holding these degrees need to get an equivalence certificate from the Association of Indian Universities (AIU), the HRD ministry said in its statement. These universities will also function under the UGC rules.

 

The profit motive

A foreign university cannot repatriate money that it makes in India. And any university seeking entry to India must be accredited by bodies in its home country. “Quality control is key and we will build the safeguard mechanism with each of the universities,” a second official in the HRD ministry said.

 

An expert was critical of these provisions. “On the one hand you are saying, we want top 400 institutes to come and on the other, you are not allowing them to repatriate surplus to the home campus. It’s a fundamental problem. I think there is still an inherent trust deficit between the government and the (foreign) educational institutes,” said Pramath Sinha, founding dean of the Indian School of Business, Hyderabad.

 

“They have to stop questioning everybody, at least the best of the institutes. This problem was there in the Bill and if they are retaining it in the executive order, it will be a huge drag,” added Sinha, who is setting up a liberal arts university, India’s first, in Haryana.

 

The two HRD ministry officials said enough changes have been made to make it attractive for foreign universities to enter India. The India campus will function as a branch campus of the parent, rather than as an independent campus. The universities will offer the same degree they are offering in their parent campus. And the ministry has reduced the deposit universities have to maintain with the ministry (and which they will forfeit in case of any violation) from Rs.50 crore to Rs.25 crore.

 

To be sure, it will not be easy for foreign universities to acquire land, especially in the context of India’s new land acquisition law. “We will not facilitate the university in getting land at a concession. Anyway, procuring land and other infrastructural facilities in India will be way cheaper than in developed countries,” said the first ministry official.

 

He added that there were still three things that would attract foreign universities to India: a huge education market and the young demography to grow that further; lower recruitment and research costs; and the opportunity to offer executive education programmes and consulting services to Indian companies.

 

The second official grandiosely described the ministry’s move as “liberalizing the higher education space the way India economy was liberalized between 1991 and 1993”.

 

Manish Sabharwal, the chief executive of staffing and training company TeamLease Services Pvt. Ltd, said that India remains an attractive destination for education. In many countries there are two problems, he added—demography and cost—but in India both the issues are in the right place. The problem, he said, is in the details.

 

Anton Muscatelli, vice-chancellor of the UK-based University of Glasgow, too stressed the importance of details. The Indian government’s willingness to allow universities to come into India should certainly boost the entry of foreign universities, but the details will be important, he said. His own university, he added, has several partnerships in India and will continue to work with strong Indian partners.

 

Once it is notified, the ministry’s order will render irrelevant the Foreign Educational Institutions (Regulation of Entry and Operations) Bill 2010, a brainchild of former HRD minister Kapil Sibal, who is currently in charge of the telecom and law ministries.

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