Education in India

Details about the Azim Premji University

I met KS Viswanathan, the head of new initiatves at the Azim Premji Foundation (APF) a couple of days ago in Bangalore and asked him for some details about the Azim Premji University (APU). This is what I learnt from a chat with him.

• The APU will be an institution of excellence in the area of education to develop outstanding education thinkers & leaders, and also serve as a think tank for long-term education change and sustainable development. Akin to the IITs, AIIMS, IIMs and the NLSUI respectively focussed on Science & Technology, Medicine, Management and Law, the APU will in effect be an IIE focussed on Education.
• The APU's vision is to promote, conceptualize and create a paradigm shift through development of outstanding leadership, research, knowledge and ideas for education and allied development sectors.
• The objectives of the APU include
  • Creating Intellectual Capital: through research based theory and outstanding, creative and socially committed leaders and thinkers. Expand the frontiers of knowledge in education and allied disciplines
  • Practice informed by sound theory: Serve as a national education resource center and present an alternative authentic voice for educational and social change
  • Demonstrating models for effective development of teachers and education leaders
• The APU has been set up through a section 25 company and will be autonomous and self-funded with no dependency on funds from the Karnataka Government.
• The Azim Premji University Ordinance 2009, was passed by the Karnataka Government in November 2009.
• The APU is being set up on 50 acres of land in Sarjapur, near Bangalore. The land is being provided by the section 25 company, which is acquiring it directly from the owners.
• It will be a fully residential university.
• The APU will not be aiming to recover all its expenditure from tuition fees. Any budgetary gap between income and expenditure will be bridged by funds provided by Section 25 company being established by Azim Premji.
• The first students will join the university in 2011. The APU will start by offering masters level courses and eventually also run a Ph.D. program.
• Apart from the classroom lectures, the students at the APU will be required to do field work in schools as an integral part of their learning.
• The APU, in addition to developing education professionals and contributing to research will work towards strengthening the educational space by:
  • Increasing the public debate on alternative approaches towards educational excellence
  • Creating possibilities and opportunities to promote innovation and piloting of new ideas/approaches
  • Supporting state and central governments to move towards a quality education revolution
  • Serving as a resource centre for the country in the areas of education and development
  • Emerging as a centre of excellence in education policy and implementation

Corporates may be able to set up universities through section 25 companies

according to the Business Standard.

“We have received requests demanding this route. The government is exploring the possibility, as it could be allowed under Section 25 of the Companies Act,” confirmed Sunil Kumar, joint secretary, Ministry of Human Resource Development (MHRD),
......

At present, educational institutions in India can be set up only by trusts, societies or companies, and it is not possible for non-profit companies, like industry associations, under Section 25 of the Companies Act, to set up institutions and get recognition from the University Grants Commission. In the primary and secondary education space, however, the Central Board of Secondary Education (CBSE) allowed companies registered under the Act to start private unaided schools last year.

Some higher education institutions have taken this route in the technical education space to escape policing by the All India Council for Technical Education (AICTE) — the body that regulates technical education in the country. For instance, many management schools have gone the Indian School of Business (ISB) way, opting for a one-year management programme (against the conventional two-year courses), and have registered themselves under Section 25 of the Act.
....

Educational institutions in India, which are set up by trusts or societies come under the purview of the Charity Commissioner, who is appointed by a state government. Section 25 of the Act, on the other hand, comes under the Central Board of Direct Taxes (CBDT), thus reinforcing the control of the Centre and not the state over the manner in which the institutions are run and financed.

However, in both the structures — non-profit or society and trust — profits cannot be taken out of the institution and have to be reinvested. Institutions registered under the Act have to use their profits, if any, in promoting the institutions. The Act also prohibits the payment of any dividend to its members. The association may enjoy all the privileges of charitable trusts, but are scrutinised by the Income-Tax Department and not Charity Commissioner, unlike limited companies.

MHRD says it is still studying the way out for students if an institution set up under the Act winds up and its assets are to be transferred to another similar institution. “As of today, if an institution set up by a society winds up, its operation and properties are transferred to another institution. But in this case, we are still studying what route a non-profit entity could acquire if it faces a similar issue,” added an HRD official.

Experts add, this arrangement will allow standards for centrally-administered institutes to be cleared by one central authority rather than different standards for different states

This was actually mooted a little over an year ago. But why all this hoopla? What is the difference between being a trust, a society or a section 25 company? What is the difficulty with a section 25 company setting up a university? A study on charities in India throws some light with a comparison of a section-25 company, a society and a trust across various parameters.

There is one uniform law across the country for companies, the Companies Act, 1956. It is this robust law protected by powerful commercial interests that makes it very difficult for the state government to take over a section 25 Company. The company form is recognised all over the world, it is more closely regulated and monitored than trusts and societies.

But the confusion still remains. Why should the state want to take over or dissolve a section-25 company running a university? In the event of the incumbent management of  a section-25 company running a university mismanaging the university, shouldn't the state be facilitating a takeover of the mismanaged section-25 company by any other interested party capable of running the university well? When the fraud at Satyam Computers came to light, the state didn't take over the company. It only appointed an independent board of directors comprising of experienced and respected professionals who set the house in order and found another entity willing to acquire the assets and liabilities of Satyam and run it going forward.

More questions than answers at this point of time.

Reliance University on the anvil

So reports The Economic Times.

On November 17, when chairman Mukesh Ambani addresses Reliance Industries’ annual general meeting, he is likely to announce the group’s next foray: education.

India’s biggest business house is planning to launch a private university in line with the Ivy League institutions, says a company insider, though the contours are yet to be finalised.

....

According to an IDFC-SSKI report, Indians spend $50 billion annually on private education. The four segments of the education market — plus two, higher, vocational and supplemental — present a $80-billion opportunity by 2012. It is expected to grow at a CAGR of 16%, says a CLSA Pacific study.

“Mukesh envisions bringing global education to India. He will outline a road map for the business in the AGM speech,” says an official close to RIL who did not wish to be named. An RIL spokesman declined to comment.

....

Ditto Jaiprakash Industries, which is already running engineering institutes, while the London-listed mining giant Vedanta Group has announced a large university near Puri in Orissa. Those in the waitlist include Chennai-based Murugappa group and FMCG company Ruchi Soya.

This had to happen.

Kapil Sibal is away courting the foreign universities to get them to set shop in India. He should be courting Indian investors too and far more aggressively at that. An Indian university can get off the blocks much faster and we may know how to run it better. There's enough and more of money in India and the know how, experience and skills required to set up and run an university can easily be purchased acquired by an Indian entity. What we need most today is the vision, the largeness of outlook and the willingness to invest money. More importantly, to think big over the really long term, well beyond one's lifetime. While Mukesh Ambani and the others to come, have enough and more of the former, we will have to wait and see about the latter.

Listen to a description of Ezra Cornell's unreasonable vision to get a sense of how a self-made millionaire decided to invest his surplus into building the foundation for a university in the mid 19th century. His motto - "I would found an institution where any person can find instruction in any field of study" - speaks for his vision, and long-term outlook. The operative word is found. He probably knew his vision may not be achieved in his lifetime, but like all visionaries, he was envisioning the way things ought to be, rather than the way things could be in his day or lifetime. He didn't stop with the vision. He hired the right institution-builders and did enough and more to give it the momentum to keep going on and on. I'd say it's still work in progress.

Jamsetji Nusserwanji Tata is another example of such a visionary closer to home.   

Mr. Narayana Murthy, Mr. Lakshmi Mittal, Mr. Ambani, Mr. Sunil Bharti Mittal and others - are you listening? Azim Premji is already off the blocks.

The Azim Premji University, a pioneering initiative in India

The Azim Premji Foundation (APF) is planning to set up the Azim Premji University (APU) a private self-financing university in Karnataka that would undertake teaching, training and R & D in fields like elementary and secondary education,education management and education policy. The APF will provide the statutory endowment fund of Rs. 25 crores. The University, while based in Karnataka will open branches elesewhere in the country. The Azim Premji University Bill is to be introduced in the Karnataka Assembly in the upcoming session, says the The Economic Times.

According to Business Line,

• The University will be self-financed, with no financial grant or assistance from the State Government
  
• Implying that reservations could apply to this university, a note issued during the meeting said that while it would be "open to all classes, castes and gender, the Government of Karnataka can make special provisions".
  
• The Board of Governors will have two Secretaries holding the charge of the education departments, while the rest will be from outside the Government. The board will appoint auditors, lay down policies, review decisions of the university, approve the budget and decide, if necessary, on the winding up of the university. The Government reserves the right to intervene in the event of mismanagement, mal-administration and indiscipline, the note, explaining some of the clauses in the proposed Bill, said.
  
• The Governor of the State will be a visitor of the university. He can seek any information and clarifications and confer degrees and the minister for higher education will be pro-visitor (pro-chancellor).

Business Standard interviewed Dileep Ranjekar, the CEO of the APF, who throws more light on their plans for the APU.

Where do you plan to have the varsity?
If Karnataka finally passes the Bill, and empowers us to start the private university, then the location will be Bangalore.

What was the inspiration behind this concept?
The biggest issue that has actually promoted us to think about the varsity is 'why is that there is no university that is focussed on elementary education in the country'. We observed that we don't have people with professional backgrounds in this country to address issues pertaining to the education sector. Hence, this university will be very similar to the national law school which was launched primarily to create professional lawyers in the country. The university will engage itself in educating professionals who, in turn, will be required for building the capabilities of teachers and managers as educators. Besides, we intend to train people who will make policy decisions based on their knowledge about education.

What courses you plan to offer?
Other than creating trained educational professionals, we plan to offer a post-graduate (MA) programme in education initially. We will also launch several short-term courses which will actually be targeted at in-service development needs of education managers, teacher educators and teachers. The second important activity is research, because research is lacking in education in India. The university will focus sharply on research on several issues to understand how things works; what causes better learning; how do we develop better people and what makes an effective teacher. There are hundreds of such issues. It will also have some experimental labs as part of the university. We also intend to collaborate with a number of states across the country to help them through education resource centres.

Since it will be a self-financing university, will students bear the cost?
Essentially it will be borne by the students. But where the students can't afford, we will have a scholarship programme.

How much funding have you received from Azim Premji for the Foundation so far?
We have earmarked close to Rs 650 crore so far, and this has been entirely funded by Azim Premji. We work with the government and we leverage the funds which we spend. The leverage is very important because the state has really the strength. Because anybody else spending money on the education is going to be very minuscule. The Foundation works with the government which is responsible for schooling. We work with close to about 20,000 schools across the country.

Will the UGC recognise the courses being offered by the university?
The university that comes into existence through a state legislation, will automatically be a recognised university. We don't have to approach the UGC for this.

The APF website lists K.S. Viswanathan as the person in charge of the APU project. Viswanathan had outlined APF's thoughts on improving education in India and its current activities in an interview last January.

VP: What exactly is the Azim Premji foundation doing now in the school scene in Karnataka?

K.S.V: The Azim Premji foundation is focused on Rural Government Schools in the states. We work along with the State Governments in executing some of their priorities. Karnataka has over 45,000 Elementary Schools and 8,000 Education functionaries. However, the learning levels in these schools are very low.

The key objective of the Azim Premji Foundation is to significantly contribute to the Universalisation of Elementary Education in India that facilitates a just, equitable and humane society. After 7 years of operations driving this goal, the foundation has now identified Teacher, Education functionaries as well as Examination reforms as the three pillars as the major programs to pursue.

Teachers tend to teach what gets tested. Teachers are the key transformational agents in the class rooms. Education Functionaries play an important role on how a teacher is actually engaged in a class room. What is needed is a common shared Vision amongst the various stake holders in the Education System in the country. With these goals, the Azim Premji Foundation has been working with the State Government on various initiatives that will supplement their efforts in improving the quality of education in the state.

Our programs in the Karnataka Government is built around Examination reforms, Class room teaching learning process, Teacher training and preparation and Academic support for schools.

We started with Accelerated Learning Program (ALP) in North East Karnataka (the most backward economically and academically) in 2001. This was followed with the Learning Guarantee Program ( LGP) where we ran programs to assess the learning's in the class measured in terms of Competencies acquired in Maths, Language and Science in Class 2 and Class 4. Based on our findings, the Karnataka Government set up a special Organization, Karnataka State Quality Assessment Organization ( KSQAO). KSQAO is now running the LGP program across the state to assess the competency acquired in the Elementary Schools in the state. Currently, we are implementing Child Friendly School initiatives in 330 schools in Surpur block of Yadgir district in NE Karnataka to assess the impact of Community participation in School management, Teacher support system as well as LGP.

We are also running a Management Development Program for 8000 Education functionaries in the state.

VP: What does the Foundation do in other states?

K.S.V: We have extended the concept of Learning Guarantee Program in the few districts in the states of MP, Gujarat, Rajasthan and Uttaranchal. We are also developing Child centric, self paced, interactive learning system using educational software in 18 languages including 4 tribal languages, to facilitate the unleashing of creativity in children.

In addition, in the states of Chhattisgarh, Orissa and Pondicherry, we are working with the Governments to assess the impact of Technology led initiatives in Class room learning along with, as well as providing Academic and Pedagogic support to Schools . Our programs cover 13 States, 16000 schools and 2.5 Mn children.

VP: India currently has about 35 Million children "out of school" and about 157 Million children in the school. How are you trying to bring a balance between quantity and quality?

K.S.V: We have a unique challenge here. We need more schools to cover larger number of children in the country and at the same time, the quality of education in terms of school infrastructure, class room process as well as Teacher support system. Post the launch of the Sarva Shiksha Abhiyan (Universalisation of Elementary Education) program, there has been an improvement in the access to the school for the children in the rural areas. Today, close to 90 % of the children have an access to an elementary school within a distance of 3 Kms from their homes. However, in the process the quality of education has taken a beating. Other programs like Mid day meals, free text books etc have further enhanced the gross enrolment ratio in the schools to around 90%. This is good and welcome news with respect to quantity.

However, quality of education has emerged as the biggest concern in the elementary school system in the country. We have around 200 mn children in the age group of 6-14; out of who only 52% of them reach Class 8 and only 31% reach class 10.Even amongst these children, only 1/3rd of the children are able to read and write their names in their native language.

One of the main reasons for the higher drop out rate as well as low learning in the elementary schools, is the quality of class room process, Curriculum design and Teacher support system in addition to other socio economic factors. The good news is there is an increased awareness on these issues and there is a good focus from all concerned including NGO's like Azim Premji Foundation, Ministry of Education in the Central and in the state government to address these issues . It is a slow but a definite process towards improving the quality of education in the elementary schools.

VP: So what, according to you, are the key needs of elementary education today?

K.S.V: Elementary Education today requires a good Academic Support System, more accountability to all stake holders including the Community for learning outcomes as well as a common shared strategic perspective amongst all stake holders in the system. Making the Teacher's job more exciting, more important as well bringing more recognition to the teachers and the Education functionaries can change the way we look at the Elementary education system in the country.

We need more Action research in the challenges of the Elementary Education. There is also a need to revamp the teacher Education system in the country focused on Elementary schools.

The APF's strategy of addressing the challenge of universalisation of elemenatary education by improving the quality of teachers and the quality of the classroom learning process is an excellent one. Their idea of walking the talk and investing to set up an university focussed on teaching and education management is a welcome step. What is more, the APF's strategy of working closely with the Government, indeed partnering with them, to leverage their strengths and complement them with the APF's own strengths is very well conceived. As Dileep Ranjekar points out, the challenge of educating all our children is a challenge of scale. No private player can match the scale of the Government's efforts. The Government has a crucial role to play. Ranjekar's choice of the word "leverage" is apt in this context. The APF's efforts (backed by its Rs. 650 crore investment - no mean sum in itself, albeit just a drop compared to the Government spending on education) can provide a multiplier effect to the Government's own investments and lead to huge improvements in teaching and learning in Government schools. By working closely with the Government (the Policy Planning Unit in the Dept. of Education in Karnataka is staffed by Government officials as well as staff from the Azim Premji Foundation) and offering the Government substantial control over the running of the proposed APU, the APF is also pre-empting the possibility of any standoffs with future Governments, run by other administrations.

The APF's initiatives in area of Education Management are described on their web site. One aspect of Education Management that doesn't find a mention in their list, but deserves attention is the economics of running schools. The challenge will be to keep fees as low as possible and affordable to the masses, yet find the ways and means to delivery a high quality education in a self-sustaining manner year on year. I hope the APF is working on this too.

The APU is likely to be the first of many more such universities likely to be set up in the coming years. Just as Jamsetji Nusserwanji Tata provided the seed investment to set up the Indian Institute of Science in Bangalore (still knowns as Tata Institute to Bangloreans) a 100 years ago, I can see a time not before long when we will have more such universities spawned by India's successful and farsighted business leaders. Imagine an Infosys University, a Mittal University, a Mahindra University, a Tata University, a Birla University ,a Reliance University, a HCL University, a TVS University, a Bharti University, a Bajaj University, an ITC University, an ICICI University, a HDFC University, and many more dotting the country over the next decade. Just the thought of the impact they could have, with each of them specialising in different areas, sends a frisson of excitement down the spine. It took almost 13 years, from 1896 when Jamsetji Nusserwanji Tata wrote to Lord Reay about the creation of a national university, to 1909 when the Government of India issued the vesting order for the institute, for the Indian Institute of Science to see the light of day. Azim Premji has shown that it will take much less time today from idea to reality.

NIIT University to come up at Neemrana in Rajasthan

At the Q1 NIIT Investors/Analysts Conference Call on June 29, 2006, Vijay Thadani, CEO of NIIT, revealed more details about their plans for NIIT university. It will be located at Neemrana in Rajasthan, about 100 km south west of Delhi. In addition to funds from NIIT, they expect the NIIT University to raise funds independently from other sources over time.

Here's the relevant extract from the transcript of that conference call, of what Thadani said.

In terms of some of the projects that we talked about in the past, I thought I will give you an update. There is the university project on which many of you have asked us in the past about its progress, so I am pleased to report our progress on the university project as follows: We have received an letter of intent from Rajasthan government to set up a university in the state of Rajasthan. We have also acquired land of 100 acres in Neemrana which is about 100 kilometers away from Delhi on the Delhi-Jaipur highway, on the other side of the road of the famous Neemrana Fort. We have already appointed a master planner, which is a British firm, as well as an Indian architect firm who are at this point of time planning out the campus. While this has happened we commenced activities of the transit campus which we set up in New Delhi city, and in that we have already commenced some post graduate programs, diploma programs in education technology and bioinformatics on one side, as well as some research programs in education technology. The transit campus and the university project already has a contingent of 27 people, most of them are senior professors who are taking positions such as the project director, the deans, and some important research and professorial staff.

As we speak to you we are in the process of going through the process of central government permission and we believe that that process would also happen in due course of time. We will be in a position to start our under graduate programs campus, start with the transit and later on the campus obviously subject to government clearances by 2007.

Of the phase one funding of 60 crores that we had talked to you about, we have so far spent about 7.3 crores. We are in the process of raising funds for the universities since that is an arms length relationship and an independent society at this point of time getting the support of NIIT system but it would be raising its own funds in due course of time.

In the Q&A session, one of the analysts, Pawan Suchdeva of Principal Mutual Fund, specifically asked about the ownership structure and the revenue model for NIIT (the company) from its investment in NIIT University.

Pawan Suchdeva: And lastly sir what will be the ownership structure of the university?
Vijay Thadani: The university is owned and managed by an independent society, which is not for profit society.
Pawan Suchdeva: Okay.
Vijay Thadani: And it has an arms length relationship with NIIT Limited as a corporate.
Pawan Suchdeva: Okay. So the revenue model for NIIT will be what?
Vijay Thadani: Out of the university?
Pawan Suchdeva: Yes.
Vijay Thadani: It will be to start with very indirect. It will be the benefit of the brand of the university, benefit of being able to get its very trained faculty from university, benefit of advanced research which the university is doing in education technology, benefit of some curriculum development, and benefit of getting university the access to the market place with NIIT. Of the half a million odd students which come to NIIT many of them want to join the university, NIIT could be helpful to the university in doing that. So to start will it will be indirect. We believe that over a period of time NIIT could become very important channel to get university the right set of students and university can become a very important platform on which NIIT can build relationships. So NIIT already has relationships with universities across the world, nearly 50 plus universities across the world. So this will become one more relationship and that will have its own benefit.

Update on NIIT University

Analysts probed for more information on NIIT's plans for NIIT University in the recent Q2 NIIT Investors/Analysts Conference Call on October 27, 2005. Both Vijay Thadani (CEO) and Rajendra Pawar (Chairman) were guarded in their replies and remained vague on most counts. Here's a summary of what they said, followed by the actual conversation in the conference call.

• they have identified a site for NIIT University in the neighbourhood of Delhi in the National Capital Region and have moved ahead on acquiring the site.
• no idea yet of the date of start of operations - depends on getting the clearances from the government.
• initially revenues for NIIT (the company) will come from licensing the NIIT brand (to NIIT University).
• the university will be completely self-funded (from NIIT and other private donations etc.) - it will not take any state funding which would come with a lot of riders.
• budgeted capital expenditure to set up the university is Rs. 60 crores - practically nothing of that has been spent so far.
• it will be a research university operating at the Masters and Ph.D. levels.
• it will be positioned as a "creator of technology in the knowledge space", by which presumably they mean they will aim to create proprietary IP of some sort.

Excerpts from the transcript of the conference call:

Ashwin Agarwal (Akash Ganga Investments): Congratulations to the NIIT management team on a good set of numbers, particularly on the India retail business. Could you fill us in on the university progress?

Vijay Thadani: Thank you Ashwin.I would ask Mr. Pawar to comment on that.

Rajendra Pawar: We had mentioned last time that we were in discussions with the government, so those discussions are progressing well. We also mentioned that we have identified a site and we have moved ahead on completing the transaction regarding the site. So,that part is progressing, but I should mention that, that is done by an independent entity, which is a society, so NIIT’s role in that is to promote that society and then the society then has to take the idea forward.

Ashwin Agarwal:Is this site near Delhi?

Rajendra Pawar: Its in the neighborhood of Delhi,in the NCR region.

Ashwin Agarwal: Okay, so by when do you feel you would have all the permissions in place to start operations?

Rajendra Pawar: I wish I knew the exact date, but because this is government procedure, that think there has been a reasonable amount of controversy on higher education, but our discussions are I think going very well. So, it is difficult for us to put a date. I would like to do it tomorrow if I could, but I think it has to go through a series of steps in various departments, but all that I can say is that all our discussions are going well and the concerned team has put the plans together quite nicely.

Alok Agarwal (individual investor): One last thing on the university front, I mean in the scheme of things as far as NIIT is concerned, directly for the shareholders and society as a separate entities, how are these two are going to work together as such so that some kind of money can flow to the shareholders of NIIT Limited?

Rajendra Pawar: So as you are aware, even now NIIT is engaged in interaction with about 60 universities worldwide in some form or the other. We have relationship of credit transfer or student transfer and so on. So at one level the idea is to construct a similar relationship with an institution which will be an institution of excellence, which will create a lot of new knowledge, and in the similar kind of the relationship which we have with some universities in UK or US want to build a relationship, but obviously we would be in a position to harmonize given that the Indian market and the Indian situation and so on so forth. So I think it will be a relationship where we would reinforce the capabilities of each other through an arm’s length relationship. So it’s a question of looking at for example research related work happening at the university and vocationalization kind of work happening in NIIT and harmonizing it so they do excellence in their spheres, but they help the overall activity and therefore that’s the way we expect derive value. So in the early phases, we will create value for the university out of our brand experience and understanding and going forward as they build their own capability and competence and intellectual property, we expect two-way movement.

Alok Agarwal: My related question is going to be like is it the university is going to be let’s say like IT engineering college or IT IIT, what is going to be the model?

Rajendra Pawar: Well we do not have too much time for details, but let me summarize and say there is going to be a research university. Its going to do Ph. D. and Masters first, and therefore we are the creator of technology in the knowledge space. That is the key focus of the university and that is how the two are differentiated, and that is how the two will be in force.

Sonal (AIM Capital):In terms of university plans, are you going for deemed university kind of the setup?

Vijay Thadani: That is one of the options.

Sonal: Okay, and in terms of university, are you going for the central universities or you have tried for some university in Madhya Pradesh also?

Vijay Thadani: In Madhya Pradesh actually the Madhya Pradesh assembly as passed the bill for NIIT University, but then after that so many court rulings and various other things are changed and have happened that is in kind of pending status. So we are in touch with on a number of fronts with states and center and we are looking for the best option for us.

Sonal: So, they are couple of states where you are trying for a university kind of ______?

Vijay Thadani: We have been in discussion with a number of states and number of states have been approaching us as well.

Sonal: Okay, and in terms of again coming back to your central university plan, would it be a UGC kind of funded university kind of setup along with NIIT or would it be in entirely funded by NIIT and that kind of setup?

Vijay Thadani: Okay, first the university will fund itself. Obviously it has to receive some funds from somewhere, which could be loan funds, which could be corpuses which it may receive. We are not looking to have any state or center supported financially supported university. That will not fit into our game plan because that does not give you any degree of freedom.

Sonal: A couple of queries, what could be the kind of capex you would require on the university front over next one or two years?

Vijay Thadani: The total funding for the university that we have shared with you over the three-year period was about Rs. 60 crores.

Sonal: This is for the Delhi Central University not the State University.

Vijay Thadani: No, this is for a university. We do not know whether it is a Delhi University or a State University or you know those are what we are attempting at.

Sonal: So, so you may not go for two to three universities tie ups at the same time?

Vijay Thadani: No, sorry, I think I need to clarify. We are talking about setting up a university right. As far as tie-ups are concerned, we have many tie-ups currently and we will have more tie- ups as we go forward, but for setting up the university by itself, what is a university? University is an institution by itself. That institution gets accreditation through a state government, it could get its accreditation through the central government, it could get accreditation through a foreign university or a local university collaboration. So all these are multiple ways by which this institution gets created. Why is it called a university because it has the power to give a formal degree. Now to get that power of formal degree you need one of these accreditations and I am using the word accreditation as means of saying you need the permission of something and you need a statute and a declaration and a notice which says that you can do so.

Sonal: So in Madhya Pradesh were you planning to go for a university or were you planning to go for a tie-up?

Vijay Thadani: When I referred to the Madhya Pradesh story, I was referring to Madhya Pradesh asking or allowing NIIT to setup an NIIT University which will be in Madhya Pradesh and for which the state legislative assemble passed a bill.

Sonal: Okay, Sir am I correct in understanding that Rs. 60 crores capex could be for a multiple of universities combined together?

Vijay Thadani: My feeling is it is for one campus of university in which you can have multiple buildings, but it will be safe to assume that it is a single university instead of assuming it to be multiple universities.

Sonal: Okay, what kind of capex you have already incurred on the university?

Vijay Thadani: University has not incurred any capex so far, because it has a small transit campus facility but that is a very small facility, its like a project office.

Sonal: For the operating expenses because we understand for getting any deemed university permission, you need to hire a lot of Ph.D. and professors so has that already been done or it is?

Vijay Thadani: The university has a compliment of people who are associated with the university, and it has the necessary qualifications.

NIIT explains the reasons for starting up NIIT University

I had wondered earlier why none of the financial analysts tracking the NIIT and Aptech stocks had probed the objectives of these companies in setting up universities. One analyst, Ashwin Agarwal of Akash Ganga Investments, has done just that in the recent Q1 NIIT Investors/Analysts Conference Call on July 28, 2005. Both Vijay Thadani (CEO)  and Rajendra Pawar (Chairman) declined to provide details in their responses saying that the UGC has asked them to keep quiet about their plans till they get approval, but they provided some basic information.

Here's the relevant extract from the transcript of that conference call.

Mr. Ashwin Agarwal, Akash Ganga: I required clarifications on a few issues; A. Broadly if you can talk about the university plans and what would be the structure. You did explain on the last call, but we would just like more flavor to it whether the classes is and the test would be conducted in the university or what are the parameters of the University Grant Commission?

Vijay Thadani: Okay. Ashwin thank you very much. I will ask Mr. Pawar to answer this question and of course he would also tell you, its a little premature but let him say that.

Rajendra Pawar: Thanks for the question. Just want to mention at this time that as I think we had indicated earlier we are in discussion regarding the process with the government and I do not need to tell you that the government has its own very detailed methods and particularly in light of what happened with the Private University Bill in some states, they are more than cautious and overcautious. So, today we are discussing only those things where we have crossed the bridges on the various policy matters and we also believe that our stating the full policy of the university before we have the formal clearances would be seen as incorrect and I guess they would take objection our making any comments till the clearances are fully obtained from them. In fact, they have indicated that to us in the discussion we are having with them, but having said that, let me at least define the principle, and the principles that we are talking out here is what are the benefits that NIIT Limited brings to the university and what are the benefits that NIIT University brings to NIIT Limited and the benefits that the university brings to NIIT Limited.

Clearly, the fact that we bring form NIIT Limited a momentum of 24 years of the strength of the brand, the strength of the intellectual assets which is a very large set of things, our understanding of the market place, our understanding of the needs of the market place; these are benefits that you bring from our 24 years of experience in NIIT Limited and we would be making available this know-how to the NIIT University. What the NIIT University would bring to the table would be the fact that since it is a research-based university which will focus on Ph.D. and Masters Program and even the B. Tech we are planning will be a research-driven B. Tech. We see the university becoming a very strong fountainhead of new knowledge and over a period of time a very strong base of standards and procedures so that some of the activities which we have done as a market-driven entity, the university would add much more rigorous standards and NIIT Limited will benefit from those standards as it makes its offering of its courses to the students.

So, therefore in summary, at this point, I would say that we look at the intellectual assets and the brand of NIIT benefiting the startup of the university and as the university goes into operation on a timetable which is more in the hands of government than with us, NIIT Limited will benefit from the body of knowledge that is generated there and from the tougher standards, which will be imposed on selection processes, examination processes from which NIIT Limited will benefit. So, at this point, I would like to leave it here, but of course, as we receive clearances and we get permissions to be able to talk about those, we would be sharing with all of you.

Ashwin: Would it be correct the summarize that since universities as on today from what I understand cannot be a for profit body, the kind of modules and courses would be booked through the franchisees in NIIT Limited, so here in NIIT would make money, but in the body of a university, it would be a nonprofit organization. Is it correct?

Vijay Thadani: One part of your comment is correct which is that the university would be a not for profit body. The financial arrangement between NIIT and at the university would be an arms length arrangement and as permitted by University Grant Commission. Today, NIIT in its current form has a number of associations and partnerships with other universities. As you know, Karnataka State Open University, etc., and those are permitted by UGC under specific guidelines. So, we presume that similar partnerships should be possible, but of course it is all subject to permission of UGC.

They are envisioning the university not just as a captive customer (licensee) of NIIT's brand and content, but with its focus on reasearch, also as a means of feeding back knowledge and standards to the NIIT business. This seems like a very good idea. Maybe NIIT (the company) may farm out R&D to NIIT University.

Private universities in India - why? how?

Why do we need private universities?

Higher education in India has largely been the preserve of the Government till recently in terms of both funding and provision of education.  But for this to continue, the Government should continue to be in a position to pour in large sums of money to fund higher education. Today, the Government is unable to find the funds even to keep up its own commitment of spending 6% of GDP on education. There is also a clamour to spend more of what little funding the Government has allocated for education, on primary education than on higher education, and quite rightly so, given that many children don't even get a basic primary and secondary education today. Thus the Government spending on higher education as a percentage of overall government spending on education is only likely to decrease further in the coming years.

But the demand for higher education is continuing to increase with more and more students wanting a higher education today than ever before. How can we bridge the gap between increasing demand and decreasing government funding for higher education? The only option is to tap the private sector to participate in the funding and provision of higher education. The process of increasing private participation in higher education has already begun with a few states like Chhattisgarh and Uttaranchal having passed legislation to permit the setting up of private universities in their states. Indeed the private sector has been funding higher education in India for a long time, albeit on a very limited scale. The Birla Institute of Technology and Science at Pilani in Rajasthan, which is funded and run by the Birla Group Trust, became an officially recognised university as far back as 1964. Other institutions like the Manipal Group in Manipal in Karnataka have been running private colleges since 1953 and the Manipal Academy of Higher Education became a deemed university in 1993. Many other self-financing colleges were set up in the early 1990s and a few of them have now become deemed universities.

Problems arising out of poor regulation of private universities

After the passing of legislation in Chhattisgarh in 2002 (and subsequently in other states like Uttaranchal), to facilitate the establishment of private Universities with a view to creating supplementary resources to assist the State Government in providing quality higher education, there was a spate of private universities that were set up under the Chhattisgarh Act. The Chhattisgarh legislation was passed in a hurry without much care, leaving many loopholes in the Act, which were quickly exploited by many organisations that set up private universities, without a serious commitment to higher education. Many of the private universities set up under the Chhattisgarh Act did not have either the infrastructure, or a campus, or the funds to provide quality higher education, and functioned out of one-room tenements. The Chhattisgarh Act did not provide for proper regulation and maintenance of standards by these universities and moreover, the Chhattisgarh Government did little to ensure that the private universities did what they were expected to do according to the legislation. Students who signed up for courses offered by private universities set up under the Chhattisgarh Act were being taken for a ride by many private universities who had no capability to offer quality courses.

Prof. Yashpal, former chairman of the University Grants Commission, petitioned the Supreme Court in 2004 to declare the Chhattisgarh legislation unconstitutional and the Supreme Court after due deliberation concurred and declared in February 2005 that all the private universities set up under the Chhattisgarh Act were illegal, putting the careers of all the students who enrolled in the institutions set up by the private universities in jeopardy. But to protect the interests of the students, the Supreme Court directed the Chhattisgarh Government to take appropriate steps to have such institutions affiliated to the already existing State Universities in Chhattisgarh. It is important to note that the Supreme Court did not state that all private universities are illegal - it has only stated that the manner in which the Chhattisgarh legislation allowed the setting up of private universities was illegal. The problem is not with private participation in higher education, but with the poorly drafted Chhattisgarh legislation and the lack of proper regulation.

Given the Government's lack of funds for higher education and the increasing demand for higher education, we simply cannot do without private universities. We have no option but to tap private funding for higher education. The task before us now is to come up with ways and means to ensure that private universities are properly regulated, yet autonomous and independent enough to flourish, and held to high standards to provide quality higher education.

How can we ensure private universities are held to high standards?

We can borrow the model from the corporate sector. Just as all companies are required by law to publish annual reports providing details of their assets, liabilities, profits and losses, the profiles of the board of directors and the management and various other financial information, every educational institution (whether public or private) should publish an annual report with details of the infrastructure and facilities available, profiles of the trustees and the administrators, the academic qualifications and experience of the staff, the courses offered, the number of students, the results of the examinations, the amount of funds available to the university and the sources of funding etc. In addition, every educational institution must get itself rated by an independent rating agency like CRISIL, ICRA or CARE and publicly announce its rating to prospective students to enable the students to choose the institution they want to enroll in.

At one stroke, this will bring in transparency and ensure that every educational institution, whether public or private, is accountable not only to those students who are studying in the institution, but to prospective students and the public at large as well. Public announcements of the financial and educational records of the institutions as well as their ratings by independent rating agencies will generate healthy competition between the various private institutions and will also put pressure on the Government funded institutions to work towards all-round improvement.

Such a system is already in place for maritime education in India. In 2004, the Directorate General of Shipping (DGS), which regulates maritime education in India, introduced a system of rating maritime training institutions in India. In 1996, maritime education was opened to private sector participation and over 130 private institutions are in operation today. To ensure that all institutions provide high quality education, the DGS has asked all maritime educational institutions to get themselves rated by one of the three reputed independent rating agencies in India – CRISIL, CARE or ICRA. The publicly announced ratings will benefit

• the students, in deciding which institution to enroll in,
• the institutes, in differentiating themselves based on their quality,
• the employers, in assessing the quality of students graduating from the institutes and
• the DGS as well, to non-intrusively regulate the maritime education sector and ensure high quality of education.

Maritime education institutes, both public and private, are now getting themselves rated by independent rating agencies and the DGS lists the ratings on its web site.

Introducing a similar model across all other sectors of higher education including engineering, medicine, arts, sciences etc. will ensure that only those institutions with better facilities, staff and infrastructure and reputations will thrive. This will go a long way in ensuring the provision of quality higher education not only in the private sector, but in the public sector as well.

The Centre and the States should pass legislation to make it mandatory for all higher education institutions to publish a detailed annual report of their financial and educational status and also be rated by independent rating agencies and publicly announce their ratings.

P.S. This is the text of an article that was published in the June 2005 issue (pages 44-47) of Amudhasurabi, a Tamil magazine . My friend Badri translated this into Tamil for Amudhasurabi. This piece is a summary of some of my previous posts on my blog..

How does Aptech Ltd earn revenues from Aptech University?

In an earlier post, I had looked at ways in which Aptech the company could earn revenue from Aptech Education Society which runs Aptech Univeristy.

It turns out that while Aptech Ltd loaned Rs. 24.43 crores to Aptech Education Society on an interest free basis, Aptech Education Society in turn used the loan to pay Aptech Ltd Rs. 5 Crores for purchasing content from Aptech Ltd and as license fees to Aptech Ltd..

Schedule 15 (Note B 13 under Significant Accounting Policies and Notes on page 57) of Aptech's 2004 Annual Report states the following.

During the previous year, the Company had formed an Education Society in Chattisgarh, for the purpose of forming a private university to move into the formal mode of education. The Society in turn, has obtained the requisite approval from the State Government and necessary notifications have been issued, by which Aptech University had been established.

The Company being the sponsoror, after obtaining the necessary board approvals, has during the year, given interest-free unsecured loans/advances aggregating to Rs. 242,180,279/- (net) (Previous year Rs. 2,158,686/-) (aggregate to date Rs. 244,338,965/-) to the society. Such sums advanced are mainly out of the GDR proceeds and are repayable on demand. These are given mainly to meet the requirements of the society towards purchase of course materials, deposit towards endowment fund and the initial capital expenditure and also towards operating expenses for the University's day-to-day functioning.

On the other hand, during the year, the Company earned revenues aggregating to Rs. 50,000,000/- from the society, in the form of sale of content and license fees.

However, Aptech University which had been set up by Aptech Education Society, was rendered null and void by the Supreme Court vide its order dated February 11, 2005 since the manner in which the private universities were created by the state of Chattisgarh was not strictly in accordance with the technicalities of passing the law through the state legislature. The University, has subsequently filed a review petition along with several others before the Supreme Court, and has also simultaneously filed a review petition to the state of Chattisgarh, that the technical defect be corrected, so that the status-quo-ante of the University is maintained. The review petition and the appeal to the State is pending decision before the Supreme Court. The management is hopeful of a positive judgment in this respect and is also considering alternative possibilities for the society setting up private universities in India and abroad, where the respective  legislatures may so permit.

However, the Company out of abundant caution has fully provided for the aforesaid loans/advances of Rs. 244,338,965/-, outstanding as at the year end.

NIIT to grant 5 Crores, and loan 25 Crores, to set up a University

According to a report in The Hindu (June 14, 2005)

IT education major NIIT Ltd today said it would invest Rs 25 crore in setting up a university in North India to enter the formal degree IT education segment and will focus on high-end as well as reserach on emerging technologies.

The Board of Directors, at a meeting, approved the grant of the corpus of Rs 5 crore for the university yesterday, extending an amount up to Rs 25 crore as loan, subject to shareholder approval, NIIT informed the Bombay Stock Exchange.

The Financial Express (June 10, 2005) reported that

To meet the growing demand for IT professionals, NIIT Ltd is planning to set up, the first of its kind, IT University in the country. To be located in north India, it will offer Masters and PhD programs to students in information and communication technologies (ICT). The project, if government approvals are received in time, is expected to be completed in a year.

Mr Pawar told FE, “at present, there are not many IT professionals with Masters and PhD degrees in the ICT sector. As we get engaged in the global economy, India will emerge as a key player to create new knowledge and this is possible only through focus on higher-end education. Our programs will offer both a formal degree and the latest curriculum, which integrates new technology developments in line with the demands of the industry.”

But the report in The Hindu (June 14, 2005) quotes Rajendra Pawar, Chairman of NIIT as saying "the proposed university would offer graduation, post-graduation, as well as PhD degrees in IT."

I had discovered earlier that the UGC had received a proposal from NIIT for grant of Deemed University status. I have written to Gitanjali Sharma (the corporate communications person at NIIT)  for more details.

The report in The Hindu raises some interesting issues.

• The board approved the grant of a corpus, presumably to a trust set up to run the university, because education must be run as not-for-profit business in India. This grant would not be recoverable by the company. It might be tax deductible though.
  
• While the Business Standard report starts off saying "NIIT would invest Rs. 25 crore" it later clarifies that NIIT will extend a loan of upto Rs. 25 crore to the university. So it does not seem to be an equity investment.

In an earlier post (May 14, 2004), I had looked at how Aptech's plans for setting up Aptech University and how Aptech expected to benefit by setting up an university. Aptech has set up a society (a non-profit organisation) called the Aptech Education Society, which will run Aptech University.

Since universities have to be run as non-profits in India, they have to be set up under the aegis of a trust or a society and no funds from the trust or the society can be taken out as dividends or profits by any individual or organisation. So how does Aptech (the commercial company) aim to benefit from setting up an university? Aptech is a publicly listed company that has raised money from the markets. If it makes an investment of Rs. 25 Crores in setting up the university, how does it plan to get a return on its investment? Does it believe that

• Aptech (the commercial company), can provide educational services to Aptech Education Society (which runs Aptech university) as a captive customer and charge for it at market rates? If so, would this be seen as a related party transaction by the Registrar of Societies and the tax authorities?
  
• Aptech (the commercial company) can license the Aptech brand to Aptech University and get paid an annual license fee in return?
  
• Aptech (the commercial company) can benefit from expected positive brand rub-off generated by Aptech University, in which case the investment will be a marketing investment?

To the above list, I would add another possible reason for NIIT to consider setting up NIIT university.

• Could the university be a strategic initiative for NIIT so that they would have control over an affiliating body and hence could now affiliate all courses offered by NIIT with a full-fledged university and be in a position to offer valid degrees in IT education? Granting money or loaning money to set up a university as well as licensing the NIIT brand name would enable to them gain some control over an university and avoid any problems that may arise if they tried to affiliate their courses with a third party university over which they had no control.

Rajendra Pawar, quoted in The Hindu, suggests as much. He said, "At present, we cannot give degrees to our students pursuing GNIIT program. This will make it possible for our students with GNIIT to go forward and get a degree."

In another post (May 21, 2004) , I had looked at the implications of a news report which quoted Pramod Khera, the Managing Director of Aptech as saying, "at least 10 percent of the total revenues would come from its new businesses, which include the University as well as online software testing and content management BPO," and wondered if this statement by Aptech's Managing Director meant that Aptech will be treating revenues from the University as part of the revenues of its publicly listed company?

Aptech in its announcement of financial results for 2004 (on April 01, 2005) says

The Company had made advances from time to time to Aptech Education Society for the purpose of utilizing the same for the functioning of Aptech University established in the state of Chattisgarh. After the Supreme Court judgement against Private Universities in Chattisgarh and since the matter pertaining to it's establishment is subjudice and also under State review, the Company out of abundant caution provided for the said advances to the tune of Rs. 2443 lacs pending a decision in the matter.

So Aptech have indeed invested about Rs. 25 Crore in Aptech university, which they have now provided for in their books as a consequence of the Supreme Court judgement which declared Aptech University along with 111 other universities in Chattisgarh as illegal. If it was a grant, there would be no reason to provide for it. So Aptech the company must have given the Rs. 2443 lacs to Aptech Education Society either as equity or as a loan.

According to a report in The New Indian Express (September 04, 2004),

Aptech has purchased 25 acres of land at Kharora village, 30 km from here. It has also deposited Rs.20 million to the state government as an endowment fund.

Pratap Pradhan (Vice Chancellor or Aptech University) said the university is currently operating at a rented building in Raipur, but its own full-fledged premises would come up within 18 months at Kharora village.

I wonder who owns the 25 acres of land - Aptech University or Aptech Education Society?

I haven't found any of the financial analysts who track Aptech or NIIT  stocks probing the objective of these companies in setting up univerisities, especially when the companies have to route their investments through a non-profit trust or society.