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Rules to set up schools tightened for corporates

Budget Private Schools

Aug 13 2013

Mint & Wall Street Journal

Prashant K. Nanda

Govt asks corporate houses to deposit Rs.50 lakh for each school, experts say it will dissuade participation

New Delhi: Corporate houses keen to open schools in partnership with the government will have to deposit Rs.50 lakh for each school with the human resource development (HRD) ministry.
This will be in addition to shouldering the entire expense of building and running the schools.
The government believes the requirement will deter entities that are not serious about education, but some experts say it will only dissuade companies from participating in the programme.
The ministry has issued a fresh qualification proposal to open 2,500 model schools in developed neighbourhoods through public-private partnerships (PPP). The government plans to spend nearly Rs.5,000 crore a year on subsidizing the cost of educating poor students and providing infrastructure grants to the companies setting up the schools.
According to the proposal document, any interested company, including Section 25 companies (non-profit) and trusts, need to have a net worth of Rs.25 crore or more during each of the two financial years preceding the date of submitting qualification application.
“… It shall undertake to make an interest-bearing deposit of Rs.50 lakh for each school awarded to it, which would be released in three equal annual instalments after the school is commissioned,” the ministry said in the document. In case more than three schools are allocated to a private entity, it shall deposit Rs.25 lakh for each additional school awarded to it.
The company will also be responsible for shouldering all expenses including purchasing land from state governments or others. “The private entities will acquire land and then develop, design, build, finance, provide infrastructure, operate, maintain, manage and own these schools,” minister of state for HRD Shashi Tharoor told parliament Monday.
The associates of a company participating in model school projects will not be allowed to take part in the scheme. Any entity hiding information or forming a cartel will be blacklisted.
The chief executive of a private company looking to participate in the scheme was critical of the process and the requirements.
“The PPP scheme of the HRD ministry has too many unanswered questions. The proposal document details is not very encouraging. It asks private players to procure land, (which) is a tough task. We believe the government should facilitate that,” he said, declining to be identified.
Besides, “when, all expenses are being taken care by the private partner till the opening of the school, what is the point of asking for the security deposit? The amount they are asking is too much,” he added. “If it’s interest-bearing, they need to spell what’s the interest rate.”
The ministry seems to have learnt nothing from its earlier PPP scheme to open 300 polytechnic institutes in the 11th five-year Plan period (2007-12), the executive said.
Following a poor response to that programme, the All India Council for Technical Education, the technical education regulator, has set up a committee to revise the scheme, the HRD ministry told Parliament on 7 July.
Narayanan Ramaswamy, partner, education practice, at consulting firm KPMG, said the government is right in asking private entities to procure real estate as that will ensure participation of only those keen on developing education.
“Government is of the view that don’t come to open school to expand your profit and this will distract some foreign companies who want to do this for quick money. The government’s stand is correct here,” he said. “But the blanket deposit amount is difficult to explain. That is discouraging.”
India’s school segment was valued at $44 billion (Rs.2.4 trillion) in 2011 and is expected to reach $144 billion by 2020, according to consulting firm Technopak Advisors Pvt. Ltd.
The HRD ministry, since it does not have the money required to expand school education, believes the PPP model is the best way to achieve this.
“Adoption of the PPP mode would lead to rapid expansion of access to quality education. The scheme for 2,500 model schools under PPP mode should be viewed as an opportunity to evolve innovative ways to empower and enable non-government players to engage in providing quality education,” the HRD ministry said in its document, but made it clear that the scheme should not be viewed as a “privatization” of school education.
The objective of the scheme is to set up 2,500 model schools for providing quality education to about 4 million children, including 2.5 million from socially and economically disadvantaged categories.
Each school can have a maximum of 2,500 students, and the government will subsidize the education of 980 of these students from underprivileged backgrounds.
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