For-profit schools may be way to quality education5 min read . Updated: 10 May 2007, 02:01 AM IST
For-profit schools may be way to quality education
For-profit schools may be way to quality education
Prabhat Jain, owner of the Pathways World School in Gurgaon, boasts of the air-conditioned classrooms in his school, its Olympic-size football field and 32-acre campus. But he also gets right to the point when asked about his intentions in opening the 600-seat school: profit.
“My school is run like a company. I have put Rs100 crore in it," said Jain, who dreams of publicly listing his school.
Sarla Holdings Pvt. Ltd, which has a sister company with interests in mining and manufacturing, runs the school as an explicit for-profit venture—a rarity in the booming sector of private schools in the country.
That might not be a rarity for much longer. In fact, development economists and business leaders alike say privatizing education may be the only way to fix a sector plagued by corruption, mediocrity and inaccessibility.
The problem, they say, is that most states have archaic laws mandating schools operate as non-profit trusts or societies in order to gain the Central Board of Secondary Education (CBSE) accreditation.
“For a long time, education was neglected by entrepreneurs and businessmen. It was seen as a charity or social cause," said Ramani Sastri, who owns the Canadian International School in Bangalore. The private school charges annual tuition of Rs5.15 lakh and is run as a trust owned by Sterling Developers, a real-estate company. “But quality education comes at a price. It is a business proposition."
Sastri said he would prefer to work as a for-profit enterprise. He plans to start a 42-acre, 600-seat school in Mumbai in 2008, which will operate as a for-profit private
Maharashtra and Haryana are among the few states that allow schools to be operated for profit.
At least 500 schools open in India every year, according to a DSP Merrill Lynch report released last month.
The report does not split government or private schools, although a separate estimate says about a growing one-third of all schools in the country are private.
India currently has 200 million school-attending children and one million schools. The government said that education is the second-biggest expenditure by Indian households, after food, ahead of clothes or shelter.
Most schools in India have historically run as charitable trusts or societies, mandated by law in some states, as well as by CBSE, a body which conducts standardized class 10 and 12 examinations. Trusts cannot technically profit, but they can reap benefits such as discounted land and exemption from income tax; they can also pay their trustees. Non-profit schools file their accounts to a registrar of societies or a charity commissioner, away from public gaze.
“A large number of schools do make money, and there are many schools which have financial arrangements which could be seen as expenditure, but support the business interests of trustees," said Madhav Chavan, programme director for Pratham, a non-governmental educational organization that has studied private schools and their growth in India. “There is a huge need to make their accounting practices transparent."
According to a joint study between Transparency International and the Delhi-based Centre for Media Studies, published last week in Mint, the total amount of corruption in education up to 12th standard topped Rs4,000 crore in 2005.
As curriculums such as the International Baccalaureate gain popularity, a number of schools, shedding the need to follow CBSE rules, say they want to stop operating as a trust or society and want to profit legally.
Experts say the for-profit nature of schools could bring more capital into education, and that a free market would allow the best to flourish. “If for-profit capital had been allowed into schools, a far bigger base of capital would be available in education, this huge shortage of schools would not be there," said Shantanu Prakash, a graduate of the Indian Institute of Management-Ahmedabad and the managing director of Educomp Solutions Ltd, a listed firm providing computer-aided learning solutions to government and private schools in India. Others such as Jeffrey R. Beard, director general of the International Baccalaureate Organization in Geneva, which offers its curriculum at 2,049 schools in 125 countries, warn that for-profit organizations can have their own ills. He favours flexibility in school ownership forms and more competition to bring in accountability.
“More choice for parents means more accountability by schools. Thirty per cent of Indian schools are private schools. As in the US, the government can find ways to make public and private schools compete against each other for students," said Beard.
School owners say private capital, even foreign capital, is straining to get into India’s school system. Pathways’ Jain has had enquiries from private equity funds based in Singapore and the US, which wish to invest in any school he sets up in the future.
“Investors can expect a 16-18% return on investment," said Sastri of Canadian International School. “Why should there be a restriction on making profit?"
Despite the surge of interest in opening schools, from business houses and private individuals, the Indian government does not have any specific rules on foreign direct investment (FDI) in schools.
A government official, who requested anonymity because he is not authorized to talk to the media, said the government has not yet received any application for foreign investment in a school.
“The Act for FDI in colleges will be enacted, and that can be seen to set the agenda for education as a whole," said a spokesperson for the ministry of human resource development, which oversees education. The Foreign Education Providers Bill is yet to be debated in Parliament, but if enacted, it would allow 100% FDI in higher education with rules that allow the Union government to regulate fees and admission procedures.
Even in states such as Maharashtra, which allow for-profit schools, owners have preferred their schools to operate as trusts. Dhirubhai Ambani International School, owned by Mukesh Ambani of Reliance Industries Ltd, or the soon-to-open Raffles chain of schools by real-estate company Emaar MGF Land Pvt. Ltd, are owned and operated as trusts. “In Maharashtra, there is the flexibility to run schools as for-profit companies, but there are no takers," said Jamshed Mistry, a senior lawyer in the Bombay high court, who has fought for more school accountability on behalf of parent groups.
Schools refute that cheaper land is what motivates them to be trusts. “Where is the land to be had?" said Lina Ashar, who runs the Kangaroo Kids chain of pre-schools and the Billa Bong High International Schools in Mumbai, Delhi, Chennai and other cities. Ashar runs a number of her schools on the licence model—where she provides the brand name, trains teachers and sets the curriculum, but the building and teacher salaries are provided by the school owner. Steadily, she has been moving away from this system to owning the schools through a trust.
“The only thing that comes in the way of running a for-profit venture is affiliation to Indian boards," said Ashar. Her chain of 57 schools in India has about 11,700 students.