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Education: Charity or Quality

A conglomerate of more than a million schools and 9931 universities, of which 77.8% are privately managed institutions and 22.5% are government colleges, the Indian education sector is strongly public-dominated. Governed by the universality and egalitarian principles to ensure full equity and inclusion into the education system and the ideology of keeping it untainted by the profit motive to maintain its piousness, education in India has historically been a charitable endeavor. Setting up or running an educational entity comes under the purview of Article 19(1)(g) of the constitution, thereby precluding its acceptance as ‘trade’, ‘commerce’, or ‘business’.

The restriction on for-profit education in India stems from the landmark judgement in the cases of Unnikrishnan v. State of Andhra Pradesh, 19932 and T.M.A Pai v. State of Karnataka, 20022, where the SC ruled that education is a symbol of charity, hence educational institutions could make a reasonable surplus to meet the cost of expansion and augmentation of facilities but disallowed profiteering and charging capitation fees. Besides, Sec 26(1)(g) of the UGC Act, 1956 authorizes UGC to rein in fees in higher education institutes. The Model Rules of the RTE Act, 2009, which establish ‘not running for profit’ as an eligibility criterion for obtaining a Certificate of recognition, are another manifestation of the ban on for-profit education. These regulations are bolstered by CBSE and CISCE Affiliation norms demanding that the schools be run by registered trusts or societies.

Whereas the not-for-profit organizations are created for public good, for-profit entities have profitability as their imperative. The prime differential lies in the way the earned profits are reinvested. Sec 8 of the Companies Act, 2013 outlaws the distribution of profits as dividends to the members of the non-profit institute and the revenues have to be ploughed back into improving the entity’s operations. Consequently, the educational institutes are impelled to reinvest their earnings for upgrading the quality of teaching, curriculum, infrastructure maintenance, hiring qualified teachers and other student-centric facilities, as opposed to running for- profit institutes whose decisions are guided by profit objectives and investor needs rather than educational priorities. As such, they may wear a semblance of superior-quality pedagogy and indulge in dubious tactics such as aggressive marketing to trap ingenuous students. The burgeoning demand for higher education, state’s financial resource crunch and constrained ability to provide subsidized education, overcrowding of community schools, exclusion of certain underprivileged sections of society and transition into a market economy has been the reason behind the surge in for-profit or proprietary education in countries like Brazil, Mongolia and USA, where the enrolment of for-profit institutions has increased by 225 percent in the past two decades.3 The government of India, analogous to other countries, in an attempt to circumvent budget constraints and shirk its responsibility of higher education has reduced the share of the union budget allocated to education from 4.14% in 2014-15 to 3.4% in 2019-204 and is encouraging private participation. Several states have also lessened their education expenditure, and Haryana and Maharashtra have already assented to for-profit educational bodies. As India is hamstrung by a sluggish GER of 24.5% and 56.2% at higher education and secondary levels5 and NEP 2020 envisions to achieve 100% GER by 2030, it is cardinal to bring education into the ambit of for-profit bodies to inspire private investment that can supplement government funding. Research by Parthenon Group has shown that higher education enrolment in China has leaped by average growth of 15% following the acceptance of for-profit education.

The results of a survey conducted by Pratham, a leading NGO underpin the failure of the Indian education system. Close to 35% of respondent children in the 7-14 age group could not read a simple paragraph of first-grade while only 30% could not do second grade basic mathematics.7 Between 2011-15, total enrollment in private schools rose by 16mn as children exited government schools in a desire for better education.6 Profit motive would rid the system of its deficiencies as institutes are incentivized to deliver high-quality education, harmonious with industry demands, to attract students and generate revenue. There is also the impetus to innovate and reduce costs to escalate profits. The tax-exempted status of not-for-profit educational institutes gets rescinded and tax on their profits would bring additional money to federal coffers.

The present restriction encourages under the table profits and loopholes constructed to channel funds for personal use. However, the opposing lobby argues that the profit-seeking institutions would exploit and commodify education degrees and relieve the government of its obligation to improve the offering of education. This is countered by the argument that the profit motive may prove beneficial as market forces come into play. Snippets of evidence from foreign countries suggest that for-profit institutes provide highly vocational courses, are basically non-selective and enroll candidates with high prospects of course incompletion and debt default. The high career- orientation makes placements the sole factor on which students base their enrolment decisions, leaving little motivation to revamp beyond their parochial vocation-focused curriculum. The ease of introducing structural changes such as mergers and franchises, engendered by profit motive, may cause displacements and prove deleterious to students.

The regulations restricting for-profit education remain a moot point in the public-policy domain. The entry of for-profit players in the Indian education landscape would undeniably bridge the demand-supply gap that the state has failed to fill in. The conspicuous profit element would attract greater investment that would propel expansion in fundamentally deprived areas. It is pertinent that the ban on for-profit educational institutes is lifted under a proper regulatory framework that debars their exploitative functioning and aptly equipoises their commercial and charitable nature. Ceilings on tuition fees and effective audits would keep education costs low and discourage shady tactics so that the education deprived communities are constructively amalgamated into the system.

Shreya AgrawalB.Com (hons) 2nd year, SRCC


1. Ministry of Human Resource Development. (2019). All India Survey on Higher Education. Centre for Civil Society. (2020, May 12). Restrictions on for-profit education in India.,not%20be%20run%20for%20profit.%E2%80%9D3. Bhangriya, M. (2015, May 20). India must consider allowing For-profit education. Business News. Jha, Rao, J. M. (2019). India’s Education Budget Cannot Fund Proposed New Education Policy. IndiaSpend. 5. Government Of India. (2018). Educational Statistics At A Glance. 6. Bhangriya, M. (2015b, May 20). India must consider allowing For-profit education. Business News. 7. Banerjee, A., & Duflo, E. (2012). Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Reprint ed.). PublicAffairs. 8. Ramakrishna, V. (2014). For-Profit Model in Higher Education. Centre for Civil Society. 9. Deming, Goldin, Katz, D. C. L. (2013). For-Profit Colleges.‘Education-Charity-Or-Quality’)
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