Note ban seen hurting education institutes charging capitation fee

Photo: Pradeep Gaur/Mint

The centre’s decision to withdraw high-value bank notes to curb unaccounted cash will hurt education institutions that charge capitation fees for admissions.

Accepting capitation fees will become difficult because of the demonetization drive, industry insiders and experts said.

Capitation fee is widely accepted in two segments of the education system—nursery admissions and professional higher education. “For the first time, it is going to get impacted in a big way,” said Madhavi Lokhande, dean, Welingkar Institute of Management.

“This move is expected to make education affordable to meritorious students akin to what it will do with the real estate market,” said Lokhande, a professor specializing in finance and entrepreneurship. She said that institutions will find it difficult to sell the so-called management quota seats.

“The key takeaway from this demonetization move is that there is a formal plan to curb the Indian theory ‘you can buy everything for cash’ and education sector was not immune to it,” she added.

Raju Davis Perepadan, chairman of the Kerala-based Holy Grace Academy that runs a chain of professional colleges, said the government move will impact the sector.

He said seats are being sold for Rs2 lakh to Rs2 crore, depending on the streams and specializations.

“While an MBBS seat goes for between Rs40 lakh to Rs60 lakh, in some medical colleges, a MD (doctor of medicine) seat has a price that ranges up to Rs2 crore. Similarly, engineering and management stream seats have a rate between Rs2 lakh and Rs10 lakh each,” he said.

He, however, said that “some in the education sector believe that there is a cost to what has happened but its impact may be temporary – may be for a year or two.”

And after that? “Those who believe in black money will find some other means. Gold may replace cash in the capitation fee market,” he said. Overall, the sector will feel the heat—fee control by states and no capitation fee may create a situation where the quality of institutions may suffer, he said.

The flow of Indian students to foreign countries may also dwindle in the coming months because black money is also used to fund student expenses when they are studying abroad.

“We have received several queries from aspirants on the issues and high net worth individual clients are more worried than normal middle class families,” said an education consultant in New Delhi, who declined to be named.

Suneet Singh Kochar, chief executive of foreign education consulting firm Fateh Education, said the move may impact the US and the UK education market as these are top destinations for Indians and the fees are relatively high. “The unaccounted cash is largely used for living cost abroad and this move will impact the decision of some,” he said adding that the situation will worsen if the current atmosphere prevails even after six months.

“Some aspirants are of the view that the situation will settle down in six months and if that does not happen, the foreign education plan may get affected for a segment of aspirants,” Kochar added.

Education-related overseas expenditure was $1.98 billion in 2015-16, according to Reserve Bank of India data and more than 250,000 Indian students were studying abroad at any given point of time.

Some embassies in New Delhi are closely monitoring the development. “Indian students in the US was at a record high in 2015-16. Students are going to US because they see value there. The demonetization issue is now talk of the country and we are observing the space,” said Matthew Asada, First Secretary for Exchanges and Education, at US embassy in New Delhi.

Pat Breen TD, Ireland’s minister for employment, said that his country is aggressively looking to attract Indian students to his country for education and any development in the domestic economy is being observed by their embassy here. He is currently in India.

“Some 2,600 Indians are pursuing education in our country and we are looking to increase it by 23% in a few years. Our embassy is improving engagement with India and any development in the domestic economy is being observed,” he said.


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