Regulating Higher Education

Sensible regulation of any sphere requires clarity on some basic issues. Higher education in India has a gross enrollment ratio of roughly around six per cent; this will need to be doubled over the next decade. We are looking at a sector that needs thousands of crores of investment, from every source imaginable: public, private, philanthropic, foreign. The enormity of the challenge is so vast that all kinds of initiatives can be accommodated. Public institutions will have a leading role in meeting this challenge. But the core problem in the sector, at a very general level, is the mismatch of supply and demand.

There are too few institutions compared to the size of the demand, and even fewer quality institutions. The reason so many institutions can hold students to ransom is simply that students have fewer choices. Even the issue of quality is related to supply. If the supply of education is not abundant and does not come from multiple sources, students have little choice, and where there is less choice there will be less accountability.

But perversely, the thrust of our regulatory regime is to diminish rather than increase the supply of education. This happens in many ways. At the most elementary level, if a good is in short supply, putting price controls does not necessarily solve the problem. Fees caps may help you feel good that students are not being exploited. But they do little to overcome the conditions that enable educational institutions to exploit in the first place; they do not increase the supply of education.

There is absolutely no doubt that an ideal education system should be needs-blind. Any student could get into an appropriate institution independently of the capacity to pay. This requires all kinds of measures by way of scholarships, loans, cross subsidies, direct transfers to students etc. But fees caps diminish supply of education more than they help the poor. And as supply increases, average prices will come down. The acute problem of students not being able to afford education can be addressed only by empowering students directly, not by curbing the autonomy of institutions.

It is also quite extraordinary that in a sector starved of proper investment, all kinds of forces are conniving to block the entry of foreign universities into India. They want these investments to be made in partnership with Indian institutions, in short not assign them any autonomy. There is outright hypocrisy in these restrictions on foreign investment in higher education. It is all right for those who can secede from the system through finance or talent to get an education abroad. But it is not all right for foreign institutions to provide education to those who remain in India. Which sections of society does the current arrangement benefit?

The second mistake in our educational mathematics is this we often think of regulation as costless. But the net effect of regulation can be to increase the cost of supplying education. Look at a couple of examples. There are primarily two ways of setting up a university: either through state or central legislation, or by acquiring deemed university status. There are a number of universities with deemed university status but institutions offering traditional undergraduate degrees do not have this path open to them. Is there something about the accreditation process that is deterring investment?

Whatever one may think of the Supreme Court’s judgment in the Chhattisgarh case, its implication will be to raise the costs of setting up universities enormously. For the implication of the judgment is that each university set up in a state should not only conform to UGC guidelines, it has to be created through legislation specifically authorising its creation. Imagine how the creation of new enterprises would slow down if each one had to be specifically authorised by state legislation. This will be the net effect of the Court’s interpretation of UGC guidelines.

Regulation also increases costs in other ways. For years, the All India Council for Technical Education (AICTE) used to collect a deposit per course of up to fifty lakhs, which it held in a joint account for 10 years. While regulatory institutions have to look at the financial solvency of institutions, such measures simply increase the cost of supplying education. It is ironic that we want to decrease fees and increase supply, but don’t want to reduce costs.

Examples of the cost of regulation can be multiplied: the way government allots land, the extraordinary rents collected by regulators etc. But regulation also produces a different kind of adverse selection. It deters genuine educationists from investing, but encourages those who are adept at manipulating the license quota raj in the system. It is not an accident that a majority of private colleges are run by politicians or their affiliates. The argument for regulation cannot be impervious to the quality of the regulators and the actual effects they have.

But the central question we should ask insistently is: what is constraining the supply of quality higher education? The pattern of our regulation is part of the answer.

The writer is President, Centre for Policy Research, New Delhi. The views expressed in this article are personal

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