Why must the License Raj in Higher Education go?
25 years ago, Manmohan Singh as Finance Minister, supported by PV Narsimha Rao started the process of dismantling the License Raj. The results are indisputable except by the die-hard commies. GDP growth and Poverty reduction rates were much higher post-1991 than any time since independence.
Unfortunately though we haven’t learnt the right lessons from Liberalisation and unfortunately, still, there are critical areas where the License Raj is still alive and kicking: with disastrous results. One such area is the education system and especially the higher education system. Let's analyse those lessons and see how they apply to the higher education system.
Rule 1: Competition is good for consumers and Monopolies are bad
25 Years ago, DoT (renamed BSNL) demanded that we pay a deposit and wait for 5 years or more for a landline connection. Quality was a joke, customer service was a myth and the repairmen would turn up in their own sweet time.
An outdated scooter model called Bajaj Chetak would command a waitlist of years and a black premium. A scooter that would have to bent parallel to the ground before kick starting was an aspirational object.
Today, every company, Private, MNC or PSU has to provide quality products and persuade the customer to buy with offers, warranty and good customer service.
So what has changed? In one word Competition. Companies that offer value to customers survive, others perish: as simple as that.
So how does higher education work?
Medical Council, AICTE and UGC are the License granting bodies who determine who can offer what courses and to how many students. Exactly like License Raj where the Ministry would decide which company could produce what item in what quantity?
Each University is a monopoly in its Jurisdiction. So only Delhi University in its jurisdiction decides what Courses shall be offered (non Technical). Only DU can decide the syllabus, teaching methodology or evaluation systems.
If you are a student in that area and want to do any Graduate program (non Engg, Medical) then you have one choice: take it or leave it.
If you are a college seeking to run an affiliate courses in that area, you have the same choice: take it or leave it.
A corollary to 1st Law: It is not regulation that protects the customer, it is competition.
What forces Amazon to take back products and process refunds? What forces a Maruti to introduce a relentless line of new products? What forces Airtel and Vodafone to reduce price and offer more Data at higher speeds?
One word, competition! The fear that the customer will go elsewhere and bring down the revenues of the company. Not fear of regulator or government, the fear of red ink on their profit and loss statements. The fear has forced the Babus of BSNL to offer 24 hours installation and service. The same fear forces PSU banks to send executives to your office rather than ask you to queue up between narrow openings of an iron grill. The same fear that forces the hostesses of Air India to smile a bit more.
Unfortunately, the Indian education system is designed to prevent competition. Instead of leaving it to the students to decide which college is good or bad, Regulators create a 200-page handbook for granting of licenses. Area in Sqft, No of computers in Lab, No of Toilets, no of PhDs on teaching staff and more etc.
Does it help? Not really. Various studies show that 10-20% of India’s engineers are peaceable. But remember all 100% of them have graduated from AICTE approved colleges. So why do these colleges which have passed the so-called ‘quality check’ of AICTE why do they lack basic skills? And graduation colleges? I wouldn’t be surprised if 5% of students have basic skills and are employable.
Law 2: Private is not Evil and Profit is not a dirty word!
Why do students go for Higher Education? More than 95% seek a career: employment. Is employment something that you value? If so, then the College, which makes you employable, is offering you a valuable service. So should you pay for it or expect charity?
If you can’t afford to pay now, would you mind taking an educational loan and repaying out of your earnings? Of course, you may not get employed at the end of the program. But if employment chances are low, why do the course in the first place?
Indian law declares that only School and College education shall be offered only by ‘Not for Profit’ entities. So let me ask the obvious questions?
- Will the quantity and quality of education be dependent on how many charitable institutions are available?
- Are all the private schools and colleges really charitable enterprises? Or are they profit making enterprises in reality?
What is Profit?
Profit being evil is one of the vilest forms of propaganda that socialism has wreaked on us. Profit is not only good; it is a force of morality.
What is profit really? The fact that an organisation makes profit (in a free society) proves that
- The organisation provides product or services of value to customers
- At a price and terms that customers voluntarily agree
Profit is also a means for the organisation to use the surplus funds to grow and expand: Serve more customers and/or offer more products of better quality. In a free society, an organisation that provides quality services grows and organisations that provide shoddy services close down.
Similarly, any college or course that doesn't offer value to end-user should be shut down.
The evidence is there for all to see. Profit making corporates are largely law-abiding, customer focused and offer quality. On the other hand the ‘non-profit’
Education Industry has produced poor quality, questionable trade practices, black money, corruption and scandals.
Politicians and their cronies control no wonder, a large majority of Colleges and Universities across India.
Corollary to Law 2: Profit doesn't mean high price
From the 1-lakh car to 1-paisa/sec Mobile calls, it is competitive innovation that has kept prices in check across products and services.
India’s private for profit Airlines today offer better prices than Government owned monopoly Air India used to offer 20 years back.
Look at any competitive industry. Mobile Handsets to Voice/Data plans to Banking Spreads to Automobiles: allowing private players has not increased prices; in fact, competition has brought prices down.
If a JU, JNU or FMS Delhi offers ridiculously low fees, it is not a sign of efficiency; it only means that Kishen is being robbed to pay Kanhaiyya. Should a University offer BA in Sanskrit or Arabic or Medieval English? Should people study the mating habits of Orangutans or Norse Mythology? It is not for the ‘Intellectuals’ to decide. Just leave it to the students without distorting choice through ridiculous subsidies.
Law 3: Regulation breeds Corruption
Under the License Raj, a company, which acquires a precious license, got to operate in a Monopoly/Oligopoly and would make certain profits. So the license was a piece of paper that guaranteed profits: A fact obvious to both the person granting and the receiving the license. Corruption was therefore inevitable.
Even today look at the Industries in India: Almost all the scams are in the heavily regulated industries: Real Estate, Liquor, Mining, Government contracts, Infrastructure and of course education. A simple but effective way of identifying regulated and corrupt industries is to see the kind of businesses politicians and their kin are involved in. You hardly see them set up companies in IT, FMCG, Food Retail etc. When a politically connected person who was minting money in Liquor tried to enter a competitive industry like Airlines, you know what happened.
Now consider the following case.
XYZ Trust wants to set up a Medical College. According to the Norms, XYZ has to acquire the land, construct all the infrastructure (Medical College plus Hospital), Equip all the labs including those which won't be needed for next 4 years (until students reach 4or 5th year), hire all faculty and then apply for permission from MCI.
Conservative estimate of cost would be about 200 Cr. That is your sunk cost. Now if you get permission, you start getting revenue, else you get zero, at least till you reapply next year. So the minimum loss of Rs 24 Cr (cost of capital) plus Salaries etc. That is the worth of that signature on the permission letter. Is not corruption inevitable?
Law 4: Quality and Innovation cannot be top down?
Perhaps, this is the most important law of them all. The future is incredibly difficult to predict, even for so-called experts. IBM was the king of the 80s, Microsoft the King of the 90s, Google and Apple the Kings of 2000s…Who will be next? Tesla, Snapchat: Who knows? Somewhere out of the 1000s of smart people innovating will come the next generation of innovative start ups.
I am a reasonably intelligent, well-educated person who has spent 15 plus years in Education. Can I predict the future of education? Not with any great certainty.
The problem reaches critical levels when Governments and regulators start dictating one size fits all policies: Policies, which affect the lives of 100s of millions of students.
An anti-English policy introduced by the Left in West Bengal 40 years ago, destroyed the employment prospects of a generation of youth. Allowing private engineering colleges gave Karnataka a first mover advantage in the IT sector, an advantage that still lasts. In a nutshell, a centralised heavily regulated education system can be very dangerous and its effects will be widespread and long term.
Even the best of Intellectuals, assuming good intentions can still take decisions with incredibly bad consequences, simply because no one can predict the future and the skill and knowledge needs of next generation.
What can we do then? Let a 1000 Universities bloom. Leave Schools and Colleges to offer a wide range of curriculum, teaching methodologies and Edtech services and let people decide what they want. The successful ones will grow and the others will shut down.
The key to competition is the choice. The choice for colleges to offer a wide range of innovative courses, Choice for colleges to seek affiliation from different universities.
About the Author:
ARKS Srinivas is an alumnus of IIM Calcutta and has been the All India CAT Director at TIME. He is currently the CEO of VistaMind Education. VistaMind is the only National Level Training institute, which prepares students for CAT through LIVE ONLINE CLASSES.