PPP in Education Workshop on PPP in Urban and Social Sectors Manish Aggarwal, Director – Consulting & Brijgopal Ladda, Head – PPP CRISIL Risk and Infrastructure Solutions Limited 21 st May 2010

2. Key Messages Historically, Education sector has witnessed low public spending Highly regulated with multitude of agencies Recent Government Initiatives would completely transform Education sector landscape Planning Commission recognizes criticality of private investments through PPPs to plug in large deficits PPPs in Education needs to recognize unique characteristics Understanding the value chain in Education would help develop appropriate models Formulation of clear policy, regulatory framework, monitoring service delivery, and design of annuity scheme critical

3. Historically, Education sector has witnessed low public spending Budgetary Allocations have not increased in percentage terms –The budgetary allocation for Education is currently at ~ 3.8% of GDP (target of 6%) –The allocation for Higher Education accounts for 12% of total Leading to large deficits across the value chain –Gross Enrolment Ratio (GER) for upper primary level is at 70% –GER for Higher Education at 12% (target 15% by 2015) –Estimates suggest need for 1500 universities against 400 at present –Availability of professional colleges in rural areas non commensurate with the total rural population –Significant regional disparities Offers immense investment opportunities….

4. Policy and Regulatory environment highly regulated Multitude of regulations that govern education sector at both centre and state level Fragmented with involvement of multiple agencies –Universities Grants Commission- Higher Education & Research –AICTE, MCI, DCI- Technical, Medical & Dental –Bar Council of India- Legal –Distance Education Council Private investment in education only as not-for-profit and can be structured through Trust/Societies/company under section 25

5. Recent Government Initiatives have potential to completely transform Education sector landscape… Elementary education received a major thrust post the launch of Sarva Shiksha Abhiyan Programme during the Xth plan Introduction of Mid- Day Meal Programme led to increase in the GER, and retention along with improving the nutritional status Enactment of Right to Free and Compulsory Education- a path breaking milestone Policy proposals in pipeline: –National Council for Higher Education and Research- to address multiplicity of regulatory agencies –National Accreditation & Regulatory Authority- to maintain pan India global standards –Three other important bills tabled in Parliament to address entry & operations of foreign educational institutions; prohibition of unfair practices; and educational tribunals bill

6. Planning Commission recognizes criticality of private investments to meet plan targets However, Private participation needs to be regulated to ensure non-negotiable quality and affordability in line with socio-economic objectives Private investment imperative to expand infrastructure and provide greater access to all forms of education in India PPPs a good way to attract private investments Concept of PPP & its applicability to education not new; requirement is to accelerate the pace and develop new models of participation Availability of schools & allied infrastructure Infrastructure For rural population & marginalized citizens of the society Access By making cost of service more visible Transparency Through easing of budgetary constraints Funding Impart right skills in line with changing demands ` Relevance PPPs would improve

7. PPPs in Education needs to recognize following key characteristics of this sector… Core education services is not-for-profit. However, infrastructure and other support services can be. Need to understand value chain Regulation & strict adherence to quality of service delivery absolutely critical for success of PPPs Local involvement to generate trust important to create buy-in Clear policy framework, institutional arrangement for creating awareness / capacity building, and common guiding principles necessary for ensuring private participation, and large pipeline of projects Sector (key sub-segments) may require both capital and operational subsidies; Annuity structure may be critical for ushering in large scale PPPs Need to have alternate revenue streams - Multiple use of infrastructure - night schools, vocational training, corporate training centres etc

8. Understanding the value chain in Education would help develop appropriate models Basis for structuring the PPP models –Gap and Objective –Social and Legal Aspects Infrastructure and allied services can be easily taken up by any infrastructure developer / player with a profit objective Operational services needs to align with not-for-profit objective of government Annuity payments may offer a good solution keeping in view the government objectives and affordability issues Alternate revenue streams may reduce need for operational subsidies 1.Management of Professional services- development of building/infrastructure Infrastructure facilities 1.Provision of Books 2.Transport, Catering 3.Library 4.Labs, IT, Administration Sports 1.Provision of Books 2.Transport, Catering 3.Library 4.Labs, IT, Administration Sports Allied Services 1.Operations - O & M 2.Provision of Faculty 3.Training and development 1.Operations - O & M 2.Provision of Faculty 3.Training and development Operational Services Bundled Approach for development of New institutions

9. PPP Models in Education Sector (illustrative only) ServiceDefinitionContract Type Infrastructure (input)Government buys servicesManagement or professional services Operational Services (process) Government buys operation services of schools (Grant in aid) Operational contract Education Services (output)Government buys seats in private schools Contract for education of specific students Facility Availability (input)Government buys facility availability- sports, IT, Labs Infrastructure services contract Facilities and Services (bundle) Government buys facility availability and services Infrastructure contract and services contract Source: PPP in Education (Dr Sam Carlson)

10. Key suggestions for stimulating private investments in Education… Formulate clear policy to promote PPPs in Education Creation of institutional and regulatory mechanism including establishment of accreditation agencies Develop appropriate models to attract private investments keeping in view the government objectives and value chain Draft Model Contract documents or atleast key principles document, which can be used by state agencies to develop project pipeline Launch pilot projects to test models

Thank You

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