Govt setting up new agency to finance IITs and IIMs

The government is in the process of creating a separate agency for financing higher education in the country, in a move that could help educational institutions tap finances and at the same time commercialise higher education, including like the IITs, IIMs and central universities.

The union cabinet on Monday approved the establishment of a Higher Education Financing Agency (HEFA) for creating capital assets in higher educational institutions, to give a major push for creation of high quality infrastructure in premier educational institutions.

The HEFA would be jointly promoted by the identified promoter and the ministry of human resource development (MHRD) with an authorised capital of Rs2,000 crore. The government equity would be Rs1,000 crore.

The HEFA would be formed as a SPV within a PSU bank/government-owned NBFC, whih will be the promoter. It would leverage equity funds to raise up to Rs20,000 crore for funding projects for infrastructure and development of world class labs in IITs/IIMs/NITs and such other institutions.

The HEFA would also mobilise CSR funds from PSUs/corporates, which would in turn be released for promoting research and innovation in these institutions on grant basis.

The HEFA would finance the civil and lab infrastructure projects through a 10-year loan. The principal portion of the loan will be repaid through the 'internal accruals' (earned through the fee receipts, research earnings etc) of the institutions. The government would service the interest portion through the regular Plan assistance.

All the centrally funded higher education institutions would be eligible for joining as members of the HEFA. For joining as members, the institution should agree to escrow a specific amount from their internal accruals to HEFA for a period of 10 years. This secured future flows would be securitised by the HEFA for mobilising the funds from the market.

Each member institution would be eligible for a credit limit as decided by HEFA based on the amount agreed to be escrowed from the internal accruals.

Meanwhile, HRD minister Prakash Javadekar denied any government move to reduce funds allocation for education and make education self financing.

"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