News Brief

Edtech Companies In India: Will Incipient Signs Of Regulatory Crackdown Force Them To Course Correct?

Sourav Datta

Jan 18, 2022, 01:35 PM | Updated 01:35 PM IST

The government is set to regulate the ed-tech sector in India.
The government is set to regulate the ed-tech sector in India.
  • The government has already begun working on regulating ed-techs and raising consumer awareness about the platform.
  • A Ministry of Education notice urged citizens to beware of potentially misleading tactics used by ed-tech companies.
  • The University Grants Commission (UGC) and the All India Council for Technical Education (AICTE) have warned institutes of the consequences of tying up with ed-tech companies. The notices asked educational institutes to stop partnering up with ed-tech companies and offer degrees through ed-techs.

    “Some ed-tech companies are giving advertisements in newspapers/social media/TV, etc, that they are offering degree and diploma programmes in ODL/online modes in association with some universities/institutions. Such a franchise arrangement is not permissible and action will be taken against defaulting ed-tech companies as well as HEIs under applicable laws/ rules,” said the notice.

    The bodies have a problem with some ed-techs taking up the entire responsibility for teaching of the online courses offered by the institutes. The educational bodies believe that ed-techs do not have the permission to tie up with universities to offer courses. The arrangement helps ed-techs gain legitimacy and differentiate themselves, while allowing universities to reach out to a larger student base without building a separate platform.

    Such rules could affect growth in the ed-tech space, which has grown at a rapid pace over the last few years. While the UGC passed an order allowing universities to run online degree programs in 2018, the pandemic has accelerated the trend of online education in India. As a result, ed-tech valuations have soared — between January 2020 and March 2021, Byju’s valuations went from $8 billion to $13 billion. UpGrad entered the Unicorn club in August 2021, almost doubling its valuations from a previous round in April 2021. Clearly, investors expect immense growth in the ed-tech space.

    However, different companies have different focus areas and some ed-tech companies would remain unaffected by the new notice. Some players like Byju’s focus on competitive exams and K12 education, whereas UpGrad has a greater focus on offering under-graduate and post-graduate degrees to users. UpGrad has tied up with several universities, both in India and abroad. The partnerships with Indian universities could possibly end soon, in light of the new notices released by the apex educational bodies.

    Why Are Regulations Necessary?

    In recent months, the regulatory scrutiny of such startups has begun increasing. Several users and ex-employees have taken to social media to complain about malpractices in the ed-tech space. The allegations levelled by users and some ex-employees include mis-selling, provision of incomplete information, high-pressure sales tactics, toxic work cultures, among others.

    Some ed-tech platforms offer highly-priced programme for schoolchildren that are allegedly sold to families that cannot afford the EMI costs. Others have alleged that they use high pressure sales tactics, and exploit parental insecurities to force sales upon parents. The use of misleading advertisements, and fictitious characters to attract users received widespread attention as well. Karti Chidambaram, a Member of Parliament, recently raised the issues related to ed-tech platforms in Parliament.

    However, supporters of ed-tech companies feel that the space is being targeted unfairly. According to them, the evidence provided against ed-techs so far has been anecdotal, which does not justify regulatory action. They argue that a few instances have been blown out of proportion, resulting in a negative image of ed-tech platforms in people’s minds.

    In addition, they believe that excessive regulation would not help the sector, and probably aggravate problems faced by the education sector. The education sector has already seen loopholes being exploited by private educational bodies for years.

    Despite being mandated to be run as not-for-profit institutions, the space has seen increasing number of private schools being run with a profit motive. Hence, supporters of ed-tech argue that the industry should be allowed to flourish freely, rather than being clamped down based on anecdotal evidences of problematic practices.

    Should India Copy The China Model?

    China had launched a crackdown on technology companies, including it huge ed-tech sector. The government implemented several measures, such as disallowing long-term repayment plans, disallowing after-school courses for children under five years, and checking on misleading advertisements. The government was also keen on reducing cases of undue profiteering and tie-ups between schools and educational platforms.

    According to some experts, high fees for schooling would also mean a reluctance to have more kids on the part of Chinese parents — a grave threat for a country with an ageing population.

    Further, China had stopped giving out new licences for tutoring companies and private schools, and said that the after-school industry has been “hijacked by capital”, which would ultimately go against the basic nature of education as a welfare good.

    But, critics argue that outright closures or heavy regulation only clamp down on supply for quality education, not the demand, making the services even costlier.

    Nevertheless, India shares several problems such as misleading advertisements and an increasing cost of after-school education, with China. If these issues continue unabated, it could result in more calls for regulation in the sector.

    Indian Government Issues Guidelines

    India’s government has already begun working on regulating ed-techs and raising consumer awareness about the platform. A Ministry of Education notice urged citizens to beware of certain potentially misleading tactics used by ed-tech companies, and asked them to read the terms and conditions before signing up.

    “Some ed-tech companies may offer the Free-Premium business model where a lot of their services might seem to be free at first glance but to gain continuous learning access, students have to opt for a paid subscription,” the Education Ministry said.

    After the guidelines were released, some large ed-tech companies announced the formation of a self-regulatory body to work on the issues discussed by the government. Nevertheless, it is quite likely that the government would still implement reforms for the sector. For ed-tech companies that are looking to raise more money from investors, any regulations that limit growth, could spell trouble.

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