New Delhi: The human resource development (HRD) ministry will channelize a portion of funds committed earlier for higher education infrastructure development through the Higher Education Funding Agency (HEFA), effectively turning a segment of grants into loans.

“Funds already approved by cabinet for infrastructure development of higher educational institutions will now be channelized via HEFA," higher education secretary R. Subrahmanyam said on Thursday.

Over the next few weeks, 9,818 crore approved by government earlier for 16 institutions, including 14 Indian Institutes of Technology (IITs), one National Institute of Technology (NIT) and one architecture school, is likely to be channelized as loans through HEFA, a non-banking financial company under the HRD ministry, according to a government official with knowledge of the development. 

Subrahmanyam said the HEFA board will meet on 20 July and is likely to sanction infrastructure and research loans worth 10,000 crore.

The move will reduce the government burden on arranging budgetary funds, bring in fiscal prudence in education spending, reduce the immediate need for a lot of funds for new institutions, and curb pilferage of finances at the level of institutions like the IITs and the NITs.

HEFA has already sanctioned loans worth 2,000 crore but only 200 crore has been disbursed according to the need.

Turning a portion of grants into loans will have two takeaways. Institutes established after 2014 will not have much to worry as their loans and interests will be serviced by the government, and technical schools including IITs established between 2008-2014 will have to repay 25% of the loan they avail from their own earnings.

Eight of the 14 IITs whose loans are getting sanctioned have been established between 2008 and 2014, said the official quoted above.

IIT Hyderabad may be sanctioned a loan of 500 crore, IIT Bhubaneswar 550 crore and IIT Patna 365 crore, according to ministry estimates.

Funds will not be given directly to institutions but to vendors entrusted with infrastructure work, in a move that is aimed at reducing leakage.

Cabinet has allowed raising 1 trillion via HEFA for education funding over the next four years. To raise this money, HEFA will have a capital base of 10,000 crore.

Subrahmanyam on Thursday said of the 10,000 crore capital base of HEFA, 6,000 crore will be given by the government, 600 crore by the HEFA joint venture partner Canara Bank. The remaining 3,400 crore will be raised from corporate houses by pledging a portion of the equity of HEFA.

Mint first reported on 3 June that the HRD ministry is looking to tap corporate houses for funding education.

Meanwhile, HRD minister Prakash Javadekar asserted that HEFA funding will help accelerate project completion and ready new campuses faster. He said his ministry is looking to raise money from the market in line with the clearance of the Union cabinet via education bonds and commercial borrowings. Javadekar said the process to raise money will start soon and in 2018-19 his ministry is looking to raise 22,000 crore.