A case for a 'Higher Education Finance Corporation'

It was reported recently that the Ministry of Human Resource Development (MHRD) has launched a new scheme of institutional financing called Higher Education Financing Agency (HEFA), being encouraged to do so by the prime minister and finance minister.

An interest-free loan of Rs 2,067 crore was sanctioned to five IITs (Bombay, Delhi, Madras, Kanpur and Kharagpur) and the National Institute of Technology-Karnataka at Suratkal in Dakshina Kannada district. This grant (in addition to the normal budgetary allocation) was meant to upgrade infrastructure and research facilities to spur innovation and make them globally competitive. HEFA is conceived as a non-banking organisation and has a target of mobilising Rs 20,000 crore through various means, including market borrowing.

In 2004, the Task Force on Higher Education in Karnataka (of which I was a member) had recommended, besides other steps, establishment of a Karnataka Higher Education Development Corporation to finance both students and institutions. Of course, as usual, nothing came out of this proposal. In 2013, the MHRD brought out a funding scheme called RUSA (Rastriya Uchaatar Shiksha Abhiyan) to upgrade infrastructure to improve the quality of higher education.

In 2014, although the UPA government had proposed to establish a National Educational Finance Corporation at the behest of then HRD minister Kapil Sibal, it was reported to have been rejected by the finance ministry. In fact, at one stage, bureaucrats in the finance department had defined expenditure on higher education as on 'non-merit good', implying poor return on investment: an incredibly short-sighted view.
In 2016, the AAP government in Delhi launched the 'Yuva Nirman Scheme', thro ugh which students could avail loans up to Rs 10 lakh on easy terms of repayment.

Of course, a large number of public sector and scheduled banks are offering education loans for studies both in India and abroad, albeit the subjects covered are limited to conventional domains like medicine, engineering and management. Financing higher education has two dimensions - one, students, and the other, institutions. In this article, I address only the second aspect.

The world over, sustaining quality necessitates massive investments on infrastructure. Of late, higher education globally has become very expensive because of high capital expenditure and recurring costs. World-class facilities for teaching-learning-training regimens require colossal financial resources. Many of our progressive institutions, even with novel plans for top-class facilities such as setting up new laboratories for biotechnology, nanotechnology, regenerative medicine, artificial intelligence, cloud computing and data analytics, to name a few, are not in a position to mobilise the required finance. This state of helplessness often leads to obsolescence. Banks generally do not lend to institutions as priority sectors. Therefore, a State Funding Agency for institutional financing, especially against the backdrop of deploying cutting edge technologies, is the need of the hour.

In Karnataka, we have a large number of Corporations, Boards and Authorities - often used or abused to rehabilitate disgruntled and election-defeated politicians - to oversee activities pertaining to transport, silk, milk, health, forest, fisheries, pollution, agriculture, horticulture, cooperatives, women and child development, and a host of other departments.

As is known, education, particularly higher education, is the driving force of our economy as it provides the enlightened and empowered statesmen, managers, scientists, technocrats, industrialists, intellectuals and other eminent as well as competent nation-builders. At present, one of the daunting problems of our colleges and universities is finding adequate funds to sustain high-quality teaching and research, the consequence of which is reflected in their poor ranking and recognition, both nationally and internationally.

Gathering funds

The envisaged Karnataka Higher Education Finance Corporation (KHEFCO), if established, could extend financial support in the form of soft loans to those institutions that have viable projects of modernisation of their infrastructure. The repayment of loan at low a rate of interest needs to be facilitated on long-term basis, say 10-15 years. The corpus fund required could be mobilised, in addition to providing seed money of Rs 1,000 crore from the state, through NRIs, special bonds, CSR contributions and benevolence of NGOs such as those established by Infosys, Azim Premji, Nandan Nilekani and others. Details of activities need to be worked out in consultation with financial experts and fund managers. What is proposed here is only a suggestion, not a full operating scheme.

Karnataka has been in the forefront of higher and professional education in India, having century-old institutions like the Indian Institute of Science, University of Mysore and the Mysore Medical College. However, if the leadership and past glory have to be maintained in the present competitive scenario, innovative approaches are required.

According to a 2015 World Bank report, lack of good infrastructure for innovation is one of the several ills plaguing higher education in India. It is relevant to mention here that if a separate agency like KHEFCO could not be established (for whatever reasons), at least the scope of funding by the Karnataka State Finance Corporation should be enlarged so as to include in its ambit financial support to deserving higher education institutions.

The idea is to nurture quality in higher education, and how this could be achieved is a matter to be explored diligently. It must be emphasised that the quantitative growth, with about 26 state universities now, must be accompanied by ingenious approaches to sustaining quality in a globalised scenario of higher education.

(The writer is former vice chancellor, University of Mysore)