Govt moves to recapitalise Higher Education Financing Agency

The union cabinet on Wednesday announced a recapitalisation plan for the Higher Education Financing Agency (HEFA) to expand the scope of meeting rising financial requirements of educational infrastructure in the country.

The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi approved the proposal for enhancing the capital base of the Higher Education Financing Agency to Rs10,000 crore and tasking it with the job of mobilising Rs1,00,000 crore for Revitalising Infrastructure and Systems in Education (RISE) by 2022.
The CCEA also approved increasing the authorised share capital of HEFA to Rs10,000 crore, and approved infusing additional government equity of Rs5,000 crore (in addition to Rs1,000 crore already provided) in HEFA.
The idea is to extend the financing facility to all central government institutions, especially those set up after 2014, including central universities which have very few internal resources, and the school education / health education infrastructure like AllMSs, Kendriya Vidyalayas.
The CCEA has approved five windows for financing under HEFA and the modalities of repaying the principal portion of the fund (interest continues to be serviced through Government grants in all these cases).
Technical institutions that are more than 10 years old will have to repay the whole principal portion of financing extended to them from internally generated budgetary resources.
Technical Institutions started between 2008 and 2014 will have to repay 25 per cent of the principal portion from internal resources, and receive grant for the balance of the principal portion.
Central universities started prior to 2014 will have to repay 10 per cent of the principal portion from internal resources, and receive grant for the balance of the principal portion.
Newly established institutions  (those started after 2014) would be provided grants for complete servicing of loan, including the principal and interest, for funding construction of permanent campuses.
All the newly set up AIIMSs and other health institutions, the Kendriya Vidyalayas  and Navodaya Vidyalayas would be funded and the department/ministry concerned will give a commitment for complete servicing of the principal and interest by ensuring adequate grants to the institution.
The CCEA also decided that the modalities for raising money from the market through government guaranteed bonds and commercial borrowings would be decided in consultation with the Department of Economic Affairs so that the funds are mobilised at the least cost.
This would enable HEFA to leverage additional resources from the market to supplement equity, to be deployed to fund the requirements of institutions.  Government guarantee would eliminate the risk factor in bonds issue and attract investment in this important national activity.
Moreover, it would enable addressing the needs of all educational institutions with differing financial capacity in an inclusive manner.
HEFA was set up on 31 May 2017 as a non-profit, non-banking financing company (NBFC) for mobilising extra-budgetary resources for building crucial infrastructure in the higher educational institutions under the central government. In the existing arrangement, the entire principle portion is repaid by the institution over ten years, and the interest portion is serviced by the government by providing additional grants to the institution. So far, funding proposals worth Rs2,016 crore have been approved by the HEFA.