Budget 2012: Education sector expects another big push
Dearton Thomas Hector February 23, 2012India has one of the world's largest education systems, including 1.3 million schools, 30,000 colleges and 542 universities. According to the Education Division at Technopak Advisors, the size of the public education sector is $40 billion and the private sector amounted to $60 billion in 2011. In last year's budget (2011-2012), Finance Minister Pranab Mukherjee allocated Rs 52,057 crore for the sector.
This year, members of the sector again expect a big push in expenditure especially related to the effective implementation of The Right of Children to Free and Compulsory Education Act (RTE Act). "It (RTE Act) is a big challenge for the government. Many issues like setting up of neighbourhood schools and infrastructure require money," says Dhiraj Mathur, Leader of Education at PwC India.
Hopes are high. "My top wish for education sector in the coming Budget is that companies be given an accelerated tax break of 150 per cent of their investment in education infrastructure," says Shantanu Prakash, MD & CEO, Educomp Solutions. This, according to him, will push capacity creation. "The other (wish) is to allow companies to set up education institutions freely and simultaneously set up a regulator for quality and compliance," he adds.
Riad Joseph, a tax Partner at Ernst & Young, feels that this Budget should address rationalisation of higher education regulatory framework through passage of key pending legislations such as the Foreign University Bill, Prohibition of Unfair Practices Bill and Education Tribunals Bill, as well as ensure timely constitution of an effective single super regulator for higher education in the country [i.e. NCHER].
Additionally, there should be increased emphasis on the public private partnership model to compensate for the shortfall in government resources such as specific budgetary allocations for PPP projects, financial and fiscal benefits for PPP projects.
According to the Confederation of Indian Industry (CII), another simple way to attract private investment in higher education, especially foreign direct investment (FDI), would be to make certain amendments in the Foreign Currency Regulation Act (FCRA).
Current law allows 100 per cent FDI in education. For-profit entities are not allowed to get licences from the University Grants Commission and the All India Council for Technical Education (AICTE) or function as private universities under Acts of different state governments. Hence, the investment vehicle is often a Society or a Trust or a Section 25 company.
Industry observers say that investment in a Section 25 company, being in exchange for a share subscription, does not come under FCRA, but investors are jittery since the FCRA legislation has harsh penal provisions.