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
21st May 2010
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
2.
Historically, Education sector has witnessed low public spending
• Budgetary Allocations have not
increased in percentage terms
Budegtary Allocation for Education vs GDP
200
160
Allocation in '000 crores
– 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
120
80
3.4
3.3
3.2
3.1
0
2005-06
2006-07
2007-08
2008-09
Year
Expenditre on Education & Training
– Gross Enrolment Ratio (GER) for upper primary
level is at 70%
% of GDP
Gross Enrolment Ratio- %
100
81.3
94.2
% Enrolment
80
60
70.5
58.8
40
20
0
1999-00
– Availability of professional colleges in rural areas
non commensurate with the total rural population
– Significant regional disparities
Offers immense investment opportunities….
3.
3.6
3.5
138
40
• Leading to large deficits across the value
chain
– Estimates suggest need for 1500 universities
against 400 at present
157
113
97
3.7
186
3.45
3.36
3.9
3.8
3.63
2004-05
– GER for Higher Education at 12% (target 15% by
2015)
3.78
3.74
2000-01
2001-02
2002-03
2003-04
Year
Elementary
Upper Primary
2004-05
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
4.
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
5.
Planning Commission recognizes criticality of private investments
to meet plan targets
• 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
PPPs would improve
Infrastructure
Access
Transparency
Funding
Relevance
Availability of
schools & allied
infrastructure
For rural
population &
marginalized
citizens of the
society
By making cost
of service more
visible
Through easing
of budgetary
constraints
Impart right
skills in line
with changing
demands `
However, Private participation needs to be regulated to ensure non-negotiable quality and affordability
6.
in line with socio-economic objectives
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
7.
Understanding the value chain in Education would help develop
appropriate models
Infrastructure facilities
1.
Operational Services
Allied Services
1.
Provision of Books
Management of Professional
1.
Operations - O & M
2.
Transport, Catering
services- development of
2.
Provision of Faculty
3.
Library
building/infrastructure
3.
Training and development
4.
Labs, IT, Administration
Sports
Bundled Approach for development of New institutions
• 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
8.
PPP Models in Education Sector (illustrative only)
Service
Definition
Contract Type
Infrastructure (input)
Government buys services
Management 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)
9.
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
10.
Thank You
www.crisil.com
maggarwal@crisil.com
bladda@crisil.com
12.