The Union cabinet on Monday gave the go-ahead for setting up an agency to finance higher education, clearing the way for raising money from the market through bonds to fund premier institutes like the IITs, IIMs and central universities.

The Higher Education Financing Agency (HEFA), announced in the budget earlier, will raise funds to the tune of Rs 20,000 crore over the next few years, according to the proposal, and provide interest-free loans to the institutes.  The government will bear the interest.

“The budget allocation (for higher education) will not be reduced because of the HEFA.  It will increase,” human resource development minister Prakash Javadekar told a media conference.

Economist Abhijit Sen, a member of the now defunct Planning Commission, said the government was “passing on the responsibility” of bearing the entire funds that public institutions require.  “The government will borrow from the market for institutions.  But the principal amount will be paid by the institution,” Sen said.

The agency would also mobilise funds companies spend as part of their corporate social responsibility and finance civil and laboratory infrastructure projects.

Javadekar said the institutes would have 10 years to pay back from their internal accruals, mainly generated from research outputs and technology transfer and consultancy projects.

Asked if institutes were likely to increase tuition fees to repay the loan, Javadekar said: “They will enhance their earning from research and consultancy as the infrastructure is enhanced.”

The cabinet also approved a proposal for starting the third phase of the Technical Education Quality Improvement Programme, under which government and government-aided engineering colleges would get funds to augment their infrastructure.

Of the Rs 2,660 crore the government has allocated for this, the World Bank will provide Rs 1,330 as soft loan.

Source: The Telegraph