People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 37

September 16, 2012


The Student Movement, Higher Education

and the End of Neo-Liberal Triumphalism - II


C P Chandrashekar

(Below we publish concluding part of excerpts from the inaugural address to the 14th all India conference of SFI delivered by C P Chandrashekar on September 4, 2012 in Madurai)


OBTAINING and adopting the nomenclature “university” in India has its regulatory implications. In principle, the provision of higher educational services that delivers recognised “degrees” cannot be undertaken as a commercial activity. As per law, no educational service provider if recognised as a university by the University Grants Commission (UGC) or is offered recognition by organisations like the All India Council on Technical Education (AICTE) can operate on a “for-profit” basis. Surpluses can be generated based on fees charged, but those surpluses will have to be ploughed back into the institution.


Despite this constraint some “not-for-profit” private players may have chosen to enter the higher education area with charitable objectives, as they had done in the past. But the rush of private interests into formal higher education is indeed surprising if the no-profit principle prevails. This gives rise to the suspicion that there is a well-recognised move to change the rule so as to allow for profit making in the educational sector. It is of course true  that while commercial activity in higher education (that is, for profit) is still illegal in India, many of these are actually profit-making institutions by another name. They charge relatively high fees and find ways to siphon out the surplus. However, those in the business for the long run are unlikely to be happy with these surreptitious route to profit, especially if the investments they have chosen to make are large. So the private rush into higher education is perhaps indicative of the fact that the rules governing higher education are likely to change.

What seems to be the case is that as part of its neo-liberal agenda the government is planning to change the rules using the need for access to high-quality, world-class education as the ruse.  As you are aware there is a bill to be considered by the parliament titled the Foreign Educational Institutions (Regulation of Entry and Operations) Bill. What is the purpose of that bill? Per se, the law on foreign direct investment in India allows foreign educational providers to enter the country. The government, vide Press Note 2 (2000 Series) dated 11.2.2000 of the Ministry of Commerce and Industry (Department of Industrial Policy and Promotion) has allowed FDI up to 100 per cent on the automatic route in the education sector, subject to the sectoral rules/regulations as may be applicable. The policy, therefore, allows for commercial provision of educational services by foreigners and the repatriation of surpluses or “profits” earned through such activity.


The problem, however, is the “sectoral regulation” that does not permit universities and institutions offering recognised degrees (whether domestic or foreign) to function as “for profit” institutions. Further, according to the Consolidated FDI Policy (effective April 1, 2011) of the government of India, FDI can be made in Indian companies, partnership firms, proprietary concerns, venture capital fund and trusts that are in the form of a venture capital fund. FDI in trusts (other than venture capital funds) and institutions established under the Societies Act is prohibited. This suggests that any foreign investor wanting to establish a recognised institution would have to do so through a "not-for-profit" company incorporated under section 25 of the Companies Act, 1956.




However, foreign universities and higher education establishments are unlikely to enter the country and establish a long-term, sustainable presence for purely altruistic reasons. If they do come to India, their interest would largely be to address the crisis of funding they face in their own countries. State funding there is on the decline. Demographic factors are reducing the share and size of the local college going population. And high costs and fees are keeping even many of these students out of the system. Earning revenue from abroad to sustain their activity is thus crucial. But for that they need to be allowed to make and repatriate profits.


According to the answer to question No 389 raised in the Lok Sabha, referred to earlier, starting with a minuscule sum of $0.19 million, FDI in the education sector had amounted to a cumulative total of $448.97 million by September 2011. Much of this is capital clearly aimed at repatriating profit since they come through the “Mauritius window” in which the double taxation treaty exempts companies “resident” in Mauritius, even if headquartered elsewhere, from taxation in India. According to the Ministry of Commerce and Industry estimate quoted in the parliamentary answer to the question, more than 75 per cent of the cumulative investment had come through this route. India does seem to be emerging as a lucrative playing field for foreign investors in the educational sector.


Using this the government is obviously trying to change the rules with its new bill. In some ways, what the Foreign Educational Institutions Bill does is that it seeks to bring certain of those foreign institutions within a separate regulatory framework, requiring institutions providing diplomas and degrees to register under a designated authority, making them subject to regulation and seeking under such regulation to ensure that the promoting institution has a proper pedigree, brings in adequate resources, employs quality faculty, offers adequate facilities, and reinvests all surpluses in the institution, which cannot function for profit. However, even though these are not considered for-profit institutions, the government is not seeking to regulate the fees they charge the students they take in, set parameters for compensation for faculty, or impose demands such as reservation of seats for disadvantaged sections as it does in its own institutions.


In fact, the Act has clauses that subvert its very intent. For example, it provides for the constitution of an Advisory Board that can exempt any foreign provider of all requirements imposed by the Act except the requirement of being a not-for-profit body. It also exempts institutions conducting any “certificate course” and awarding any qualification other than a degree or diploma to be exempt from most of the provisions of the Act, making them subject only to certain reporting requirements. This amounts to saying that if a foreign provider enters the country, reports its presence, and advertises and runs only such “certificate courses” (as opposed to courses offering degrees and recognised diplomas), it would have all the rights that many of the so-called “fly-by-night” operators exploit today.




By creating a separate regulatory bill for foreign institutions the government is clearly segmenting the higher education sector. Using that segmentation and the argument on the need to promote “world class” education in the country, it is is likely, in time, to push for dilution of the not-for-profit criterion for the foreign segment. Once that is done a case to extend the principle to the domestic sector based on equity considerations can be pushed. ‘Why discriminate against Indians?’ would be the argument.


The case for dilution of the rules governing the foreign segment is also being strengthened by using the instruments that education is a service that comes under the General Agreement on Trade in Services (GATS).  Some time back, the union commerce ministry had put out a consultation paper that clearly aimed at building support for an Indian offer on education in the negotiations under the GATS. The paper, while inviting opinions on a host of issues, was clearly inclined to offering foreign educational providers significant concessions that would facilitate their participation in Indian education. In its view: “Given that India’s public spending, GER (gross enrolment ratio) levels and private sector participation are low, even when compared to developing countries, there appears to be a case for improving the effectiveness of public spending and increasing the participation of private players, both domestic and foreign.” GATS is a trading agreement and therefore applies to those engaged in trade in services for profit. Providing such concession would force a fundamental transformation of the face of higher education in the country.


In their search for profit and its repatriation, foreign investors too are bound to make a case under the ongoing GATS negotiations to permit the easier entry of commercial educational providers with repatriation rights. This could result in a conflict between the decision to permit entry by foreign educational service providers and the terms of such entry, on the one hand, and the current understanding of the role institutions of higher education should play. Since GATS is a commercial agreement, India cannot make any commitment with regard to education under GATS, without rethinking the principles it has held and continues to hold on the educational front.


Put all of this together and both the motivation and the likely outcome of this bill is clear. If the intent is to attract new, more and better foreign investment in higher education to close the demand-supply gap, then the specific framework being chosen is likely to subvert its intent. If the idea is to regulate only those who have been coming and would come, then a separate law just for foreign operators as opposed to all non-state players is inexplicable. This suggests that the process underway is one of creating a window for foreign players and then changing the rules of the game in ways that persuade them to exploit the opportunity. And if the rules are changed for foreign players, they would have to be changed for private domestic players as well.  The transition to a new regime would then be complete.




The implications of this should be clear. For the progressive student movement, the struggle for an accessible, high quality and democratic system of higher education is part of the effort to understand and undermine the onslaught of a predatory capitalism with a neo-liberal ideology. That struggle is indeed underway in India and the SFI has been a leading force in that struggle. I am therefore proud to be here to salute you.


There are many who argue that the success of neo-liberalism in India, with its high rate of growth and exports of knowledge-intensive services, makes it a different case. I would, therefore, like to underline the fact that it is in some of the countries that neo-liberal ideology has been most successful that the student movement against the neo-liberal onslaught, especially in higher education, has been the strongest. I would like to draw attention to the case of Chile, the poster child of neo-liberalism under the tutelage for long of the military that had destabilised the democratically elected government of president Salvador Allende.


For over a year now the students of Chile organised among other forces under the Student Confederation of Chile (CONFECH), a confederation of student unions, and the University of Chile Student Federation (FECH) has been putting pressure on president Sebastian Pinera and his government to roll back the neo-liberal transformation of the educational system in Chile. Their latest protest was on August 23, 2012 when multiple marches and confrontation with the police led to arrests of 113 students. But this was just the most recent episode in a series. Earlier, on June 28, 2012, for example, thousands of students marched along the main thoroughfare of Santiago to continue the protest that is remarkable for its persistence and continuing intensity. In April this year education minister Harald Beyer proposed a new university education funding plan that did not roll back privatisation but promised to remove private banks from the educational loan process and decrease interest rates from 6 per cent to 2 per cent. The president of the University of Chile Student Federation (FECH) Gabriel Boric, reflecting the popular mood, rejected the proposal. "We don't want to trade debt for debt, which is what the government is offering us," he reportedly said.


Chile, which for many years was presented as a country that, because of neo-liberal policies recommended by the Chicago Boys among others, had avoided the fate that the lost decade imposed on many countries in Latin America. That however is not true. The lost decade was because of neo-liberalism and not because of the absence of it. In fact neo-liberalism has meant the worst forms of inequality in Chile. The average income of the richest 10 per cent of Chileans is higher than Norway’s, while that of the poorest 10 per cent is similar to that of the population of an extremely poor country like the Ivory Coast in West Africa. This has affected higher education too. They will demand reform of the way Chile’s education system is funded. It is one of the most privatised in the world, and perhaps the most expensive relative to income. Fewer than half of all Chilean children get a free high school education. As one analyst has noted: Under neo-liberalism, “the promise of making college education available for all took the worst possible turn: an increase in enrollment was possible only to the degree to which students and their families went into debt. University fees in Chile are among the highest in the world and most of them are paid by credit.” In the event, “the relatively rich pay for the best basic education (elementary and high school) and benefit from the best universities (admitted on the basis of exam scores and/or purchasing power), while those with fewer resources and a mediocre basic education have to make substantial sacrifices to attend dubious institutions at a high cost. Thus, protest for a better education is a statement against social inequality.”


Though it is more than a year since the periodic and massive student protest began little has been achieved except for a reduction in interest rates and similar “reforms”. So the student movement itself is moving forward, going beyond just educational reform to other social and economic issues. According to one analyst: “Taxation; healthcare; immigration. The list of grievances goes on. Chile’s student leaders have argued that inequities are everywhere in Chilean society – and that they are all rooted in political atrophy.” Clearly, the battle for a better, universally available and democratic educational system is a battle against neo-liberalism itself.