Let a million schools bloom

Do we want domestic service providers to stay in India? Or do we want to impose high costs on doing business, so that they exit to the Middle East and elsewhere? That’s a bit like the manufacturing story. FDI out of India of $15 billion isn’t only about competitiveness of Indian companies. It is also about high compliance costs. What have we got in the present instance? Financial analysts need certification and Institute of Chartered Financial Analysts of India (ICFAI) has been delivering that for some time.

Several years down the line, sensing the market, along comes Chartered Financial Analysts (CFA) Institute, with a global presence. And we have a trademark infringement case filed by CFA against ICFAI and Delhi High Court’s interim injunction of August 2006, asking ICFAI to drop ‘chartered financial analyst’ from its name. There have been such instances in manufacturing. We shouldn’t be surprised that service mark infringement cases should now extend to services, including education. How is education different from anything else, regardless of our hypocritical attitudes towards profit-making in education? The infringement case should have ended the matter, settled by courts, a commercial dispute and no more.

If that didn’t happen, that is partly because of ICFAI, but more because of AICTE. In March 2007, ICFAI filed a petition in Guwahati high court, alleging CFA ran a technical education programme without AICTE approval. The court referred this to AICTE, resulting in an effective ban on CFA’s operations, subject to whatever legal action CFA wants to take. And we have a can of worms and I don’t mean the purely temporary issue of what happens to 7,000 students due to take exams on June 3. First, is AICTE’s action based on the issue of AICTE permission, or is there also an element of protecting the domestic provider? Manufacturing witnessed this battle during the Bombay Club days and the country ruled in favour of competition. But we seem to be fighting the battle again over services.

Second, AICTE is supposed to look after technical education, but what on earth is technical education? That is not an expression that can be readily defined. Hence, anything leading to a diploma comes under the purview of AICTE and anything leading to a degree comes under the purview of UGC. A two-year management programme that is done through a university leads to a degree and UGC is the regulator. This is accordingly non-technical.

But you might have a two-year management programme that is equivalent in all respects, except that it is not done through a university and therefore leads to a diploma. This is interpreted as technical and AICTE is the regulator. To everyone other than HRD ministry, this multiplicity of regulators seems illogical.

Third, for such professional courses, where the market is the judge of quality, one should wonder whether we need regulators at all. This is a broader point than the limited narrow issue of whether all technical courses require AICTE approval. In my understanding of the law as it stands today, they do not.

But should the approval requirement at all exist? It hasn’t ensured quality, either through UGC or AICTE. There are several business school rankings undertaken by assorted magazines. They tend to disagree on rankings of individual schools, but they all agree on one common strand. Barring Delhi University’s Faculty Management Studies, not a single degree programme figures in the top league. The top is reserved for diplomas, private and public, and this is because diploma programmes are controlled less. Sure, there is asymmetry of information and one requires disclosure (including information on fees). Technical education providers need to function as companies with profits and balance sheets and which are answerable to shareholders. However, once those norms are imposed, there is no role for something like AICTE. Fourth, if a primeval AICTE continues, it will find no scope for regulation and interpreting it as control.

How many square metres are there per student? How many part-time students are equal to one full-time student? How many faculty members have PhD degrees? What fees are charged? AICTE, and UGC, try to ensure quality through controlling inputs and input costs, reminiscent of what BICP used to do for manufacturing. Through the proposed draft bill which will treat foreign universities as deemed universities, HRD ministry now proposes to repeat the mistake. Such control hasn’t worked for manufacturing or education. Thanks to problems of actually downsizing, BICP hasn’t been closed down. It exists, but no one knows what it does. It has become irrelevant and Indian manufacturing competitiveness has improved, not deteriorated.

The best solution is to scrap AICTE. If that’s not possible, make AICTE irrelevant by clearing up a grey area of the law, regarding the mandatory nature of AICTE approval. De facto, the approval is not mandatory. But de jure, AICTE thinks it is, which causes the problem. If this confusion is cleared, educational institutes will have a choice through two parallel tracks. If AICTE performs a useful role, there is no reason why institutes shouldn’t opt for approval. Stated differently, let’s do a zero-based budgeting exercise on AICTE. Let’s not treat AICTE’s utility as axiomatic.
The writer is an economist