The Never Ending License Permit Quota Raj in Higher Education

If we keep trying to get the state to control every aspect of education and commerce, our outcomes will continue to be miserable.

The Indian Express reported yesterday that All India Council Of Technical Education (AICTE) has accepted the report of the government-appointed committee, which has recommended a ceiling on the tuition fee charged by all private institutes for technical courses including engineering and MBA. The committee has fixed the maximum (tuition and development) fee –

• For a two-year MBA course at Rs 1.57 lakh to Rs 1.71 lakh per annum, depending on the location of the institute
• For a four-year engineering degree (BE or B Tech) at Rs 1.44 lakh to 1.58 lakh. It has also proposed the maximum fee for technical courses like B Arch, B Pharma, MCA and M Tech.

The Committee was setup after the Supreme Court directed the government to set fees to stop, what it sees as commercialisation of education. There are broadly two reasons why this should worry us:

First, the diagnosis in itself is wrong. The current substandard state that the education sector is in is because of more regulation, not for the lack of it. Second, the issue of increasing encroaching by judiciary into executive trough is a serious concern. This is not the first time that the Government has delegated the executive decision making to the Judiciary. From banning commercial surrogacy to now capping fees for technical educational institutes, it seems the govt is happy to take orders from the Supreme Court on matters that solely fall under its domain.

Anyone who has run an educational institute would tell the honorable Supreme Court Judge who headed the panel which suggested these caps how devastating and foolish this idea is. It seems that we haven’t learned any lessons from the RTE act which forced closed down thousands of small but efficiently run schools.

RTE act forces schools not only to invest in physical infrastructure (instead of learning outcomes) thereby raising their investment costs, it also forces them to teach poor disadvantaged students for almost free, by setting aside a specified quota for them. These schools have only two options: either close down or raise their fees for everyone to comply with the RTE act, to finance the infrastructure and to subsidise the poor kids’ education. This has wreaked havoc in primary education.

Does the government want to do the same to higher education too? On the one hand, the Prime Minister talks about skill India, on the other AICTE is bent on taking decisions that will set us decades back. There are eight immediate concerns that the committee has overlooked in its hurry to usher in the socialist era in higher education:

First, the most important and immediate concern is that of regulation. AICTE is the technical education regulator but it can’t effectively execute the job as scale and scope this kind of regulation demands is massive. Then there is a case against regulation itself. It will lead to:

• More harassment by the authorities and their grease palming given India’s corruption culture
• Many illegal institutes will crop up with substandard quality and little oversight

If we keep trying to get the state to control every aspect of education and commerce, our outcomes will continue to be miserable.

Second, the AICTE and the committee doesn’t realise that in Engineering and MBA, top technical educational institutes (IITs, NITs, IIMs) are not Private but Government. The fees of top business school in India, IIM Ahmedabad (Government Institute) comes around to 9 lakh per annum (approx.). Fees for almost all other private business schools is either equal or much lower than this (For instance, Fees at XLRI comes around to 8.5 lakhs approx.). Capping the fees for all at 1.57 lakh will spell doom for even reputed institutes like XLRI and SP Jain.

Third, Government institutes are highly subsidised but still have higher fees than private institutes. Private institutes won’t be able to compete with the likes of IIMs/IITs for they don’t have the benefit of government subsidies.

Fourth, There are limited seats in government institutes. Majority of students are absorbed by the private ones. Capping fees below 2 lakh means that these institutes will have to increase the intake which will ultimately result in reduced quality of education.

Fifth, Limited revenues mean limited scope for them to spend it on quality professors or better infrastructure. Not to mention the fact that lakhs of students who can’t get into IITs/IIMs will nowhere else to go if these private institutions start shutting down. Primary education is still breathing despite thousand cuts by RTE act for there are too many schools. What will happen to higher education is anyone’s guess when we have so few technical institutes to begin with?

Sixth, the lowering of fees will destroy the competition and result in lower standards since institutes will have to cut costs to meet their expenditure. This will lead to more jobless youth. Less fees may appeal to students in the short run but in the long run, it will be disastrous for the technical and higher education as a whole.

Seventh, It won’t make technical education more accessible to poor students as intended. The policies framed with good intentions rarely translate into good results. When there aren’t enough technical institutes to absorb students, where they will go? Of course, they will be forced to take courses in humanities etc which doesn’t solve our problem. We need more trained individuals in technical skills, not less.

Eighth, the future of India is heavily dependent on technical education. If private sector feels strangulated and start closing shop, then government will have to open more and more institutes to offset the demand because we just can’t afford not to have a skilled and trained workforce. This will result in more subsidy burden on the taxpayers. In its intention to benefit poor students who can’t afford higher education, it will end up hurting not just those same students it intends to help but also the taxpayers.

License-Permit-Quota Raj killed the manufacturing industry in India. We are still living with its after effects when millions of youth who enter the market every year can’t find jobs. Forget Skill India, there won’t be enough technical institutes left to even meet the present demand.

What the judiciary and the government need to understand is that commercialisation of education is not bad. If education is treated as business, then it does more good than harm. And it would be easier for them to understand why such steps are disastrous if they understood basic economics. Putting barriers (like capping fess) will only lead to less competition in the market. Who would like to open a business if it’s not profitable? There should be ease of doing business in every sector. The government has no business to decide which business is ethically eligible for commercialisation and which is not.

Our lawmakers and honorable judges don’t understand economics 101. A simple introduction to ‘demand and supply ‘will help them know the potential havoc their actions can wreak in higher education. It’s time, they understood the tyranny of good intentions. As the great Milton Friedman said:

One of the great mistakes is to judge policies and programs by their intentions rather than their results.