1. Feasibility, Implementation and
Policy Framework of Public
Private Partnership in the
Indian Education System
ABSTRACT
This paper Identifies and critiques the models of Public
Private Partnership (PPP) implemented in the Indian
school and higher education system. It Examines the cost-
benefit analysis of the current structural models existing in
India and other nations using the data highlighting the
expenses for project appraisal, and the role of various
parties (public andprivate). Lastly, it proposes effective
solutions to enfore PPP in Indian education.
Sudiksha Joshi
Intern, National Institute for Transforming India (NITI)
Aayog

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UNIT 1: INTRODUCTION
There are more than 8.1 million children out of school in India despite numerous governmental initiatives.
Heralded in 2001, the Sarva Shiksha Abhiyan program has enrolled over 60 million additional children into
school, achieving near gender parity. Nonetheless, India stands in crossroads with inequality, poor education
quality and high dropout rates in the deteriorating education system.
The Ministry of Human Resource Development has targeted to achiever 30% Gross Enrollment Ratio (GER)
by 2020. To achieve this target wherein 40 million students would be enrolled in higher education system,
the CAGR needs to push up the growth rate to 8% yearly. Currently, 14.6 million students are enrolled in the
higher education sector, and an estimated 25 million new vacancies would be required by 2020 to cater to
the increased demand. Further, India would require additional 6,000 universities and 35,000 colleges over
the next 12 years.
There is a huge demand-supply gap in this sphere- while the demand is mushrooming at 20%, supply is
struggling to catch-up at 11%. Considering the finite financial resources with state and central governments,
and the gaping gap between demand and supply, we should unleash the power of Public Private Partnership
in lower and higher education system by devising and revising old and new models, facilitative norms and
regulatory mechanisms.
The mandate for PPP in higher education comes from The National Knowledge Commission with dual role of
government in supplying land, and private’s role in administering finances. Under the PPP approach, private
sector usually delivers the services, and the government is responsible for pumping in the resources. PPP
brings together actions based on mutually agreed goals and principles, entailing mutual accountability,
reciprocal obligations, partaking risks and investment, and jointly executing administrative duties.
Objectives of Public Private Sector Participation in Education:
● Facilitating trust between public and private sector.
● Designing transparent and accountable management system and
● Achieving higher quality education through an accreditation system.

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UNIT 2: PPP IN INDIA AND CHALLENGES FACED
EXISTING OR PLANNED PPPs
School Management and School Adoption PPP Models:
● Punjab Adarsh Model School Scheme
● Rajasthan Education Initiative
● Municipal Corporation of Greater Mumbai’s PPP policy
● Gujarat PPP policy and the central government’s Model School scheme
AIDED SCHOOLS
Aided school models unlock PPPs in school education where the goal was to widen access to schools.
Using government funds, Private partners run aided schools. Currently, aided schools enrol 16 million
elementary level students.
Financial Model
Private partners incur costs for infrastructure and state governments renumerate teachers computed on per
student basis. Private partners derive non salary grants for repair and maintenance costs, purchase of
educational aids and other utility receipts. These grants compose of estimated 5% of total governmental aid.
PUNJAB: ADARSH MODEL
Adarsh Model School Scheme was launched to expand and address the defaults for secondary schools in
villages. Students are exempted from fee and 25% of the vacancies are filled with children of panchayat
body, which had provided land.
Scaling 8-10 acres of land, the panchayat leases them for 99 years priced at Rs 50 per acre. They apportion
Rs. 7.5 crore of capital expense in a 7:3 ratio between government and private partners to maintain each
school of up to 2,000 children. Unavailing to perfect the standards, private operators can take over the
school from the government and charge fees from 75% of the enrolled children other than those from the
villages whose panchayats provided land to the operator. If the private operator also defaults on its
obligations, the state level Punjab Education Development Board (the overarching department for managing
Adarsh Schools), can take over the schools.

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State Level Management: Primary Responsibilities of PEDB
● Changes in state policies affect Adarsh schools.
● Display grants for capital disbursement and operating expenses punctually to the private partners.
● Inspecting the work of Adarsh schools, producing annual comprehensive reports of each Adarsh
school and ruling actions, wherever deemed appropriate.
● Determining benchmarks that define improvements and achievements in Adarsh schools.
RAJASTHAN EDUCATION INITIATIVE
Rajasthan’s 2 models of PPP in education are – the school adoption model and the Design Build Finance
Operate and Transfer (DBFOT) model. Both aim to leverage the private sector to amplify technology in
middle and senior schools in villages.
Bharti Foundation
Bharti Foundation recompenses refurbishment expenses and stipends teachers. Presently, government
does not reimburse the operational funding on a per student basis. It particularly enrolls girls, drop-out
children and socially and economically backward children.
Block Resource Coordinators periodically audit schools and Bharti Foundation submits monthly progress
communiques to REI elaborating strides on definitive parameters. The government evaluates the project
quarterly and deploys third party committee to assess every alternate year. Members of this committee
include personnel from multilateral agencies and consultancy companies.
Challenges:
● Originally, government officers doubted the efficacy of the entire project especially they mistrusted
that the adopted school would charge a fee.
● Infrastructural matters included haphazardly maintained buildings, dysfunctional toilets, lack of
electricity and water.
● Adversarial relationship with the pre-existing teachers in the adopted government schools.
● Operational sustainability is hampered due to lack of operational capitalization.

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DBFOT Project
DBFOT model of PPP has an execution time of 30 years. It covers 5 schools in each district, and a total of
165 schools in the state, 50 schools in Phase I in Ajmer and Udaipur divisions. Its key features include
voucher-funded students, partial fee payment and operational autonomy of providers. Central government
subsidize and provides a cap of 20% of the project’s cost of Viable Gap Funding (VGF), mainly for
infrastructure. Additionally, Asian Development Bank financially assists this project.
However, the government terminated the project as teachers protested, saying that the government wanted
to “saffronize” education by handing over the land to big corporates, and schools to right wing organizations
such as RSS. Lastly, they feared that they would be replaced or transferred by private partners once PPP’s
advent in education starting spreading over the state.
SCHOOL ADOPTION MODEL IN MUMBAI
Private partners in this PPP model ‘adopt’ a Municipal Corporation of Greater Mumbai (MCGM) school, but
the government (MCGM) commissions, retains teachers and principal, and renumerates them.
Naandi Foundation is a non governmental organization that has collaborated with civil societies, private
partners and government agencies to uplift girls’ rights through education. It monitors routinely activities such
as student and teacher attendance, provides curriculum support, teacher training and mentoring, innovative
pedagogy, feedback and other critical school operations.
Teacher Assistants (TAs) in pre-primary classes service MCGM teachers with forming coursework,
conducting group initiatives, managing classrooms, tutorials and sometimes grading. Contractual agreement
obliges government to reimburse 60% of per child cost to Naandi Foundation, while private donors pool the
remainder fee. Moreover, the government also supplies free items to students. Naandi’s intervention has
helped to contextualize and modernize the school affairs according to the needs of community and schools.
ALL ABOUT EDUCOMP: THE ENGINE DRIVING INDIAN EDUCATION SYSTEM
Educomp is the largest education company in India, reaching out to 26,000 schools and 15 million learners,
that has refashioned the education ecosystem by assimilating digital and online products in everyday
classroom teaching. Standing at the forefront, it has evolved in a span of 16 years, and transcended beyond
borders into a global education solution provider. It devises and enforces innovative models in schools,

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constructs and dispatches content to elongate students’ learning capacity, and its applications have
revolutionized the usage of IT in the digital age.
Furthermore, Educomp has helped state governments to implement PPP projects by developing content,
education infrastructure and upbringing teachers. Educomp makes upfront investment for hardware,
software, and related services for schools. Currently, its projects are widespread in Assam, Karnataka,
Orissa, Tripura, Gujarat, Uttar Pradesh, West Bengal, Tamil Nadu, Haryana, Jharkhand, Rajasthan, Punjab,
Chhattisgarh, and Andhra Pradesh alongside government support. Offering computer aided education in
schools on PPP (BOOT) model, Educomp makes initial investments, that the government departments
reimburse periodically over the years, and receives 30% of revenue from computer aided projects. It has
also partnered with Punjab government to build and run Adarsh schools.
Other constraints from Educomp’s perspective:
● The government earmarks very limited revenue to suffice Information and Communication
Technology (ICT) to the colossal masses.
● ICT content will not be amply applauded and used unless it accommodates regional languages in its
network, especially till senior schools. Thereupon, language is a barricade in espousing ICT to all
citizens.
● Teachers, students and the societies largely are oblivious of the boundless technological potential
and dither to explore the perks from ICT.
● There are scarcely skilled teachers in rural areas. Even when a trained person is available, s/he has
limited exposure to methods of professing and training ICT and higher order thinking skills to
students.
CHALLENGES OF ENFORCING PPP FRAMEWORK IN INDIA
● Scant and deferred governmental reimbursements
At time the government procrastinates reimbursing private partners on a per student basis. This
reimbursement covers the expenses of private partners and is vital for functioning a PPP contract, yet the
problem resonates. For instance, NGOs that operate Municipal Corporation of Greater Mumbai (MCGM)
schools are reimbursed up to 60% of the per child cost, creating a funding gap in the operations of the
provider. Gap funding is a blow to the sustainability of school operations as operator has to divert its

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organizational energy in procuring finances separate from supervising daily work. Moreover, schools don’t
present an economically attractive and commercially viable investment where they can reap considerable
dividends, as opposed to other PPP in other segments.
In a nutshell, inadequate, untimely government funding, and administrative aspects hinder professional
private school chains and low-cost private schools to enter to PPP agreements.
● Uncertainty of clash from teachers’ union
Teachers union might oppose, protest when new schools under PPP models introduce and alter
pedagogical, management and governance structure. Teachers in Mumbai have opposed it because they
believe it's a form of privatization. Beyond the philosophical opposition to privatization, they are misguided
into thinking that they would lose their jobs although such policies don’t exist.
● Controlled sovereignty
Bounded in the School Adoption Model where private partners have limited autonomy over hiring, firing and
daily management of teachers, private operators’ hands are tied in deciding whether or not to hold teachers
accountable for student learning.
● Paucity of competent managers
Viability Gap Funding is fundamental as it allows quality private operators participating in PPPs, to facilitate
outcome at economies of scale, uplifting sustainability and scalability. Actually, private partners entering PPP
contract don’t have fundraising capacity to bear full operational expenses, including the per student cost that
the government does not reimburse. This limits the number of organizations that would be able to enter
PPPs.
Moreover, institutional donors are circumspect to joining the funding arrangements in which they can’t visibly
see an eventual exit.
Finally, there are inadequate number of private operators with surplus staff, and are willing to operate in
vernacular languages, as most private operators provide instruction in English language. Since, the
government operates few english medium school, this is a constraint for private partner in scaling PPP
schools.

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● Observed administration of different stakeholders
Implementing PPP schools is mired by challenges of steering expectations with government, parents and the
broader education ecosystem. Private partners have to relay concerns to the government about their profit
motive driving them to invest business in PPP education system. Similarly, they have to dissuade family
members from sending their children to government schools because such schools lack the skills,
equipments and faculty to harness and unleash the true calibre hidden in children. PPPs in education is
devoid of a thorough political backing, and the skepticism among both the government and private agencies
prevents continuity of constructive dialogue. In the absence of an organised lobby for PPPs, the
implementation of these policies has been dependent on ad-hoc interest in PPPs by elected officials or
bureaucrats.
● Absence of the requisite ecosystem to implement
We need an agent that can enable chart policies and guide trust and invalidate misgivings between public
and private entities, given the nascency of education PPPs. For instance, the US-based NewSchools
Venture Fund (NSVF) is a catalyst that helps seed new operators and brings different stakeholders on a
common platform.

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UNIT 3: PPPs ACROSS THE WORLD AND LESSONS FOR INDIA
CHARTER SCHOOLS IN USA
Charter schools are special type of schools that receive government funding, but are independent of the
typical public school system. They exemplify ‘alternative education’ where pedagogical approaches differ
from the mainstream learning environment such as by emphasizing on small class size and closer teacher -
student relationship.
Private partners autonomously regulate charter schools, rather than getting directions from state or district
level. Receiving funds based on per student, schools are responsible for ensuring quality as stated by the
authorizing body in the contractual agreement or charter. Contracts assigned to schools last for 3-5 years,
although they can be extended up to 15 years.
Preferably, charter schools run elementary schools (40% of the total) as they are small in size, have fewer
discipline issues, less deviation in students’ performance, and can readily recruit employees.
Notwithstanding underperformance in selective charter schools, they gain learning momentum rapidly and
witness increment in the mean scores, as they are under strict surveillance. The nationwide labyrinth of
Knowledge is Power Program (KIPP) college preparatory schools offer free open enrollment in poverty
driven and underdeveloped societies across the US. Established under state charter school laws, KIPP
leads in the network of charter schools.
Charter School Development Center funds, grants and administers alternative sources of financing, usually
with preferential interest rates backed by philanthropy. If a school does not render its obligations, it loses
the right to acquire funds from the state, and is ‘deauthorised’ until reinstated by another school
management company.
In the US, private agencies such as Standard & Poor’s analyse academic, financial and demographic trends
for school districts to arrive at benchmarks for school performance. In addition, efforts like
www.SchoolResults.org have tools that allow parents to compare the performance of various schools within
school districts.
ACADEMIES IN ENGLAND
Just as charter schools, ‘academies’ schools independently function from local government and don’t have
to adhere to the national curriculum and regulations for teachers’ remuneration. The Department of

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Education directly funds these state funded schools which are mostly secondary schools. Further, the
Academy Funding Agreements outlines and monitors the terms and conditions for setting up these schools.
They are non profit charitable trusts and can procure funds from corporate or personal sponsors.
Types of Academies:
● Free Schools: Governed as a PPP
● Convertor Academies: Previously government operated schools, but now have willingly chosen to
run as independent PPPs because they have been rated as ‘good’ or ‘outstanding’.
● Sponsor Academies: These are similar to converter academies except they are compelled to be
managed by private charitable ‘trust’.
Impact of academies
● The Academies Annual Report 2011-12 stated that underperforming schools are recovering faster
than similar schools that the government supervises.
● According to research by the National College for Teaching and Leadership, three or more schools
in a consortium/ trust improved speedily than the standalone academies.
Structure of academies
Through an annual competitive process, operators can apply to open a new academy school for funds that
the Department of Education yields. Accepted applicants draw funds and backing to open a school within 18
months.
The Funding Agreement grants all academies 7 year rolling contract, provided that the operators meet the
performance standards. The Office of Standards in Education, Children’s Services and Skills scrutinizes
them and students’ conduct of work via annual tests for 7, 11, 16 and 18 years old students.
If an academy underperforms, the school gets a pre-warning notice followed by a warning notice. Later on,
the funding agreement terminates if the performance doesn’t raise to the expectation, whereby either the
school shuts down or another operator takes over it.

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Occasionally, state owns land and lease it to the operator. The government creates a national funding
formula to fund based on per pupil irrespective of school type to ensure transparency, and fair funding
system. Additionally, government gives ‘top-up’ payments to students requiring the most- for example, those
depended on school meals, living with disability or foster parents.
Ideally, governments should wholly, not partially reimburse operating costs of the schools. International
evidence exhorts that governments have strived to refund for all operating expenses that private partners
undertake. For instance, England’s first VGF amounted $2 million (Rs.12.3 crore) and as they steadily
succeeded, the government has heightened their reimbursement.
PAKISTAN
● Foundation Assisted Program (FAS)
The semi-autonomous organization, Punjab Education Foundation (PEF), enforces the FAS program. Its
main component is the per student cash subsidy for existing low-cost private elementary and secondary
schools and schools are forbidden to charge fees beyond the subsidy. With subsidy of Rs. 350 in
elementary and Rs. 400 in secondary schools, the government directly pays them to the schools. These
schools must have 100-750 students only.
The school executive has entire operational autonomy to fix the budget, pedagogy, recruit teachers and uses
its own discretion to utilize subsidies. However, PEF officials are given unrestricted access to partner
schools to monitor enrolment, attendance, physical facilities and infrastructure.
The programme combines incentives and assessments to cultivate quality. A secondary non-partisan agency
organizes ‘School Quality Assurance Tests’ semi annually to gauge learning outcomes and quality
standards. If schools fail the tests twice, they are expelled from the program.
To stimulate, the PEF provides professional development courses for partner FAS schools. 5 outstanding
teachers and one best performing school in every district earn bonuses.
● Adopt-A-School Programme
Pakistan’s second model of PPP is Adopt-A School (AAS) program, that engages philanthropies to in the
operation of government schools. Each type of partnership works with every government school differently.
NGOs are responsible for managerial and service deliveries. Alternatively, other partnerships target to uplift
infrastructure.

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WHAT INDIA CAN GAIN FROM INTERNATIONAL EXPERIENCE:
● Schools must expand only if we can predict they can be accountable for their performance:
Mismanaged schools can go unnoticed if schools with unacceptably dismal quality schools can diffuse
exponentially. Governments should licence only those schools which they can monitor, and when they have
agreed mutually to share data to supervise the quality.
● Ensure access to quality teachers:
From the example of US, charter schools have well qualified teachers who are at least university graduates,
and school operators have refined training modules and teacher recruitment processes. For instance,
graduates in Boston schools have to enroll in a one year residency programme where they are Teaching
Assistants (TA) and are a ‘master’ teacher trains them to be full time teachers. Likewise, KIPP network
facilitates a hard core school leader development programme, and invests in shaping strong school leaders.
● Be clear about ‘take-over’ processes and quality expectations:
When schools are converted to academies, they should be absolutely clear on the quality standards
expected from them and the notification process when problem arises.
● Schools do better when they operate in groups of three or more:
With over 600 trusts functioning the schools in groups of 3 or more as a consortium, they achieve better
results with their students, allowing flexibility for students to pursue courses on the other schools in the
consortium. This widens the scope of opportunities from a wide array of course, facilities and programs
taught under multifarious teachers and staffs. This atmosphere also scales up innovation rapidly, providing
effective support to individual students.
For example, Cabot Learning Federation manages 5 primary and 6 secondary schools, centrally appoints
teachers which are delegated across those schools, enhances training and rotates the staff according to the
needs. Organizing central services, its ‘school improvement team’ consults with struggling teachers.

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UNIT 4: PPP MODELS IN EDUCATION
● Basic Infrastructure Model: The government manages and operates the institutions (schools and
universities), while the private sector invests in infrastructure and earns annualized receipts from the
government.
● Equity/Hybrid Model/ Design and Build Model: Both government and private invest in
infrastructure although private sector conducts operations.
● Lease or own-develop-operate: The government contracts or sells facilities to the private partner
private, while the latter develops and operates the facility under the government auspice for a
specific time period as mentioned in the contract.
● Build-operate-transfer (BOT): The private partner can exclusively lease to finance, build, operate,
maintain, manage and collect user fees in exchanging for providing facilities. To amortize its
investment, it earns fee for a fixed period, and at the end of the contract tenure it hands over the
reigns to the government.
KEY ELEMENTS OF PPP
● Viability Gap Funding (VGF)
Customarily provided in competitive bid projects, in VGF, government will meet at most 20% of capital cost
of a PPP in education project. It can pitch in another 20% of the project’s expenses to attract more private
investors in the bidding stage, and the project will be bestowed to those private partners which need the
minimum VGF support. Ministry of Finance administers the distribution of VGF scheme and money. In this
way, it is a force multiplier, enabling government to leverage its re-sources more effectively.
● Corporate Social Responsibility (CSR)
Corporate sectors can harness their interest in taking the lead of student education to a higher next level
through a framework. They can give one time assistance to meliorate infrastructure and facilities by their
sound prowess, as it will be unreasonable to expect them to endow recurring costs periodically in the long
term. However, even to reach this step, the PPP framework should portray responsibilities of corporate
sector. PPP and CSR can work in conjunction to lower costs, and enhance quality.

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Alternatively, government should back package—funded and contingent—to achieve minimum leverage and
optimal exposure (fiscal risk). It should vigilantly de-risk debt as more debt is de-risked, the fewer incentives
are available to lenders/private operators, shrinking the probability of success.
CLASSIFYING PPP IN SCHOOL EDUCATION
● Provision of infrastructure (Private Financing Initiative)
Here the private partner builds, owns and operates the infrastructure facilities and the government runs the
school via a long term concord using these resources. The private entity systematizes the budget and
operates in lieu of the fee it receives during the 20-30 years contract timeline. After the contract expires, the
government takes over the ownership and assets, though the private can extend its retention of the contact.
There are rigorous performance criteria for perpetuating school services, and based on the satisfactory
maintenance, school gets paid quarterly.
Usually, the land where school is build belongs to the government or local body, and the private owns it till
the contract terminates. The government uses the infrastructure against payment of a fee.
Adding a minute deviation to this model, private sector, instead of the government, can avail land and
construct school framework for a fee from the government, which banks on satisfaction of certain
performance parameters. The government will manage the school activities, and return it to the counterparty
when the contract is due.
The government will make annuity payments quarterly after an independent agency has certified about
reaching the targeted administrative standards- standards of promptly delivering and refurbishing physical
infrastructure.
Only after the physical infrastructure is ready, and accessible, the contractors will procure their first payment.
This feature will incentivize private partners to taper their construction duration, and evenly address the time-
overrun problem- commonplace when public agencies construct buildings. This would wipe out copious
government agencies in lending their hands.
Additionally, private partners can expand innovative designs, and the government need not stipulate the
design prototypes, but rather should understate its requirements and layout architecture, subject to approval.
Initially, the government could promote developing consortium of financial institutions and builders to take up
these projects. It has to timely pay annuities by setting escrow accounts. There should be a clear cut

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document which emphasizes on how to refurbish the dilapidated buildings that will be constructed to the
satisfaction of government in lieu of the annuity payments. If the expenditure of investment is not very large,
this annuity payment can be reduced to a period of 10 years subject to satisfactory maintenance of
refurbished infrastructure during the period of contract.
● Whole School Management
Here the private partner constructs school building, appoints staff and educational services in exchange for
money based on the the number of students sponsored by the government. The private partner fully bears
the capital cost.
As the school functions, the government reimburses the recurring cost of the sponsored students. Private
operators bear the full autonomy of recruiting its staff and setting school service conditions. The per capita
fee is determined by a process of bidding among the technically competent and responsible private partners.
Further, they can manage quotas for which it is charged a higher fee.
● Town Schools:
Infrastructurally faulty, these private schools run in suburban areas and non metro towns. So, a PPP model
for these town schools could revamp the fragile, and decrepit schools. The government could grant capital at
a truncated interest rate, repayable over 5-8 years. A banking channel will release government shares and
will recover the funds from the school, payable at an interest in future, incentivizing private partners to
ameliorate infrastructure. Accommodating 40 students in one class from 6th-12th grade, government will be
their benefactor.
ANALYSIS OF EFFICACY OF PPP MODELS
Perceptively, teachers in private schools are more accountable than those in government schools because
of the inherent structure of management. Hence, even low income families make their best efforts to educate
their children in private schools at the cost of higher fee in contrast to nominal or negligible fee at
government schools.
Moreover, state governments are either opening fewer or no high schools since the past decade due to
acute financial constraints, and although many private schools have opened to alleviate this precarious
situation, their quality lacks in extremely rural and downtrodden areas. Since school fee is indispensable to
the functioning of unaided schools, and very few parents can afford it, PPP entry can drastically abate the

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problem. Also if these schools receive payments of per student enrolled which is equivalent to the actual
costs in the government school, they can strikingly reinforce quality.
Likewise, it takes much longer time to fill up the vacancies of teachers, to search and recruit contractors to
build government schools. To trump the discrepancies, private sector can uphold and impart professionalism
into the system, given that they have government support.
Lastly, bringing more private sectors in the arena would spurt a robust competition for improvement, enabling
them to truncate costs. Thus, PPP could augment the government school system ponderously and liquidate
the budgetary bottlenecks and lack of capacity rampant in the extant system by expanding phase-wise.
Availing facilities
Although the government is responsible to pay for the capital investment, private sector finds it difficult to rely
on a single customer whose political and policy priorities vary as new leaders form the government after
elections, fueling predicament on the riskiness to invest or not. Consequently, contracting private
institutions to finance and build schools is more challenging than contracting other projects.

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UNIT 5: RECOMMENDATIONS FOR SUCCESSFULLY IMPLEMENTING PPP IN
EDUCATION
FINANCING: EXPENDITURE AND FUNDING SOURCES
● Financing of Public–Private Partnership Projects
Selecting appropriate funding instruments can make a huge difference in equity, efficiency and potency,
while implementing the PPP models. Efficiency fluctuates with respect to leakages or loopholes in the
system, and the time delayed for funds to reach the next level. Similarly, equity in allocation banks on who
manages the passage of money, and the compliance of a firm is a precursor to transparency and stringent
rules of oversight. In a nutshell, which funding channel is effective depends on where the funds arise, how
they pass, who pays and the intermediate source that controls the movement of flow from source to
destination.
The government must coherently sell its PPP strategy to allude private sector because private companies
will invest and take associated risks in such a project only if they can visualise its success. So, it is
imperative to pay heed to manifold preconditions before discharging a PPP project.
Firstly, the government should assure that the project is sustainable and bankable for private financing as
the private enterprises pursue returns for delivering its services and capital invested. They also have incur
development costs especially in a project as sensitive as higher education.
Projects are bankable if there is an explicit and balanced exit scenario. This allows private parties to quantify
the worst-case outcomes and project potential losses that can manifest due to defaults or mismanaging due
to bureaucratic bottlenecks.
Secondly, the government must test the expected project structure with private bidders, before tendering to
the project. This will beckon private companies and augment the scale of bidders. This structure will lay out
the planned and proportionate risk sharing, business case, financing structure and services carved by each
of the private and state government, will be negotiable to adjustments, instead of wiping out the project.
The government can show a few, say, 3-6 pilot projects and delineate a time frame for tendering these
projects to mitigate political risks to the bidders. This could satisfy the prospective private contractors that
there will an unimpeded and durable pipeline where lies their credible business stronghold.

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Public and/or Private Funding
Financing customarily comes from both public and private banks. For instance, equity obtained from
institutional investors, loans from commercial or development banks, and capital (assets) injected from
public.
Government should provide “viability gap funding”, as it would reimburse unsustainable activities or those
which offer very marginal return rate to the private party, although, are essential to running the PPP project.
For example, resources used to host professional networks related to science in schools and universities.
International organizations can pump equity capital and loan in early stages to uplift investments which have
sufficiently long time horizons. Habitually, private enterprises are least interested as they expect short term
returns on their investments. Therefore, international sectors can partner with banks to mitigate investment
risks while implementing the project.
Availability Payment or Payment per Student
For simplicity’s sake, private companies should be responsible to make and provide infrastructure to the
public students. In return, they will be annually paid from the government upon achieving agreed-upon
performance indicators. Both the public and private parties would monitor and report the service and
performance delivery.
Alternatively, private party could be paid on a per student basis. However, the drawback of this approach is
the following- usually public party controls how many students enroll in higher and secondary education, and
if they install public funded schools in close proximity to a private university, then the students will prefer the
former as it is cheap or even free. So, private parties usually reject this model.
Student Fees
There are two interdependent ingredients of a lucrative pro-equity financing for higher education:
1. Variable fees for students- fee that depends on the family’s overall income and asset status
2. Income-contingent loans- loan is repaid after fixed time periods based on income
These are a means to end even for students coming from impoverished background, as need based
scholarship or financial aid coupled with student loans at cheaper rates can be saviour.

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In the variable-fee schemes, students’ family elaborates the maximum they can afford towards the
education. Moreover, the government sets a ceiling on the maximum fee the institute can charge and
contributes some towards their education. Needy and qualified students are not liable to pay a fee to ensure
that they are not compelled to study in low-cost and deteriorating quality institutions.
Furthermore, the government should increase admittance of income contingent loans. While students from
threshold economic background can accrue conventional mortgage-type bank loans, those not from well-off
economic background can avail their tuition fee from government provided income-contingent loans.
Repayment is contingent on the future income of the borrower: people with low earnings make low
repayments, and people with low lifetime earnings do not repay the loan principal in full. Such a loan protects
a student from excessive risk and can promote efficiency (by the protection from risk) and access (fees
financed by the loans free up resources for access).
VOUCHER PROGRAMS: THE PANACEA OF PPP?
The government provides school vouchers which are certificates/entitlements given to mainly
underprivileged families to educate their children at their prefered school. For example, the Right to
Education Act, 2009 (RTE) reserves a quarter of seats for Economically Weaker Sections (EWS) of the
society. This voucher program reimburses private schools on a per student basis.
Features of Voucher System:
● Demand for vouchers determines funding for it.
● If schools cannot attract enough schools even after providing vouchers, they will have to shut down
their schools.
● Parents can freely choose among public, private and PPP schools. Schools have to comply with the
defined state standards, keeping a distinction between finance and provision of services.
The intent of voucher system is to give the disadvantaged societal sections with equal set of choices that
their well-off counterparts have. If the students from well off backgrounds don’t acquire satisfactory quality
education, they can either exit the current school for a better one, or voice their concerns by engaging in
activities that improve the existing conditions of the school.
However, the poor students don’t have the prerogative to “exit” to a superior school, as their rich
counterparts have. Not only that, they possess a minimal political “voice” to raise their concerns, and thus

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are doubly incapacitated. Thus, voucher system is the best option to offer as it give equal rights to everyone,
and warns public school operators to upgrade the defaults inherent in the system- such as hiring best
teachers, holding them accountable, and being responsive to parents’ needs- otherwise they will witness a
high dropout and low enrollment rates. Vouchers in PPP models will inherently eliminate the status quo in
public and private schools and ensure equality of opportunities, harness individual capabilities and empower
the potential of downtrodden children.
Infrastructurally, voucher system will stimulate investment by the private partners, attributing this feature to
the greater security of streams of revenue. By computing the arithmetic mean of private school fees in the
entourage, the government can fix that as amount of a voucher. Enforcing would necessitate pooling need
based children, having an electronic database that can track the attendance, performance of every student in
each school, and setting up of bank account where vouchers will be directly transferred as school fee (to
avoid double payment).
Essentially, vouchers will be distributed proportional to income, disability status, and/ or merit. It will lessen
stratification as vouchers will be targeted at individual level, not based on discriminatory hierarchical
casteism as widespread in many rural and urban areas. We can augment the number of vouchers as a
function of a composite measure of ‘backwardness’ (that includes income, family educational history, gender,
and if necessary caste).
IMPORTANCE OF PRIVATE FINANCING OF THE PUBLIC-PRIVATE PARTNERSHIP CONCEPT
Private financing of the up-front infrastructure is crucial as it gives the sponsor the option of not paying the
service fees if the PPP supplier doesn’t fulfill the quality obligations. This is measured over the whole lifetime
of the PPP project. Accordingly, if this tool shall work in praxis, the sponsor will only pay in instalments over
the whole project lifetime. Therefore the PPP supplier needs to finance the investment alone by drawing in
necessary loan capital and equity.
PPP’s discipling tools might lose their effects if the government wholly or partially finances and the PPP
supplier might confront austere ramifications during the project’s lifetime.
A. Primary Part of the Financing Will Be Equity
The PPP supplier should allocate adequate equity, and the government should not take up any part of the
equity proportion, as it could aggravate into conflict of interest and undercut PPP’s disciplining effects. The
government should dig deeper into the debt market and revitalize provident and insurance funds markets to
invest in infrastructure projects. Equity markets need to function optimally to attract equity partners otherwise

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the cost of capital will skyrocket. Also, the risks associated with these projects are analogously manageable,
provided that the government stands by during the project’s entire lifetime.
B. Normally Loan Financing Is Obtained at Fixed Terms over the Project Lifetime
A PPP contract with fixed costs or borrowing with fixed rather than adjustable rate loans is better, as it
makes procurement easier and more transparent. Moreover, most costs are kept under control and PPP
suppliers have to hedge risks.
Logically, it is better to contract particularly since the entire infrastructure will most likely be built from the
very beginning. Not doing so might impose implicit risk on the sponsor that the PPP supplier may fail to
allocate infrastructure equipments later on.
Debt ratings is crucial to attract financing as it ensures transparency. Ratings will plummet is risks are not
addressed, that will consequently surge margin costs.
Inasmuch as a sponsor covers all costs, he/she should oversee that the PPP contract distributes the risks
fairly. For instance, financial risks are paramount to counteract, so letting the PPP supplier take risks on the
financing should not be an option.
Mostly, a PPP project’s lifetime is 30 years but it could be shorter, and should not estimatedly overstep the
investment time horizon. 30 years time period connotes that the intended infrastructure will be durable, and
there is a long time to write off the investment. After that, the sponsor becomes in charge of the infrastructure
at scrap value or at a diminished value relative to the original investment.
C. Bank Loans on Fixed Terms
We must seek assistance from multilateral banks such as Asian Development Bank, Nordic Investment Bank
and World Bank group. Moreover, short term financing is integral wherever sponsors cannot procure loan
capital from multilateral banks. This will smoothen the payment model for the sponsor who will have to repay
the interest, margin payments and variable costs. The government should also undertake currency and
rollover risk associated with payments/loans given by such banks in foreign currency by carefully hedging in
a diverse portfolio of swaps and options. Additionally, risk should be borne best by that party which is best
equipped to handle it. This measure should not taken as a complication to a PPP model as every
procurement will carry similar risks for any project to be successful, regardless of how higher education is
financed.

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CURRENCY FINANCE
Opportunities from undertaking long term investment in school infrastructure arise from debt capital markets,
that settle robust yield curves, and inculcate market dynamism, and reforms. Governments can and should
mobilize long-term local currency debt in PPP in education to ensure that the projects are viable and
allocate bankable risk.
Fountainhead of Long Term Local Currency Funding
● Local commercial banks— They are less risk averse when assessing projects in India as they
pragmatically view the political, technocratic and bureaucratic risk.
● Global commercial banks— They are more convoluted than local commercial banks, but are a
window to the global financial markets. Usually, they have ample liquidity, loans with long tenures,
and possibly deal with local activities, that gives them limited access to local currency.
● Development financial institutions— These are bilateral institutions, multilateral institutions such
as World Bank and International Finance Corporation (member of the World Bank group), They have
low interest rates, long tenures, grace periods, provide guarantees and insurance in specific
financing risks that the PPP project faces. Anyhow, matching funds from DFIs are primarily in foreign
currency- can involve affixed costs correlated to circumstances (such as procurement, safeguards,
financial management), that should complying with DFI practices.
● Retail and Institutional investors— Pensions and insurance funds (example of institutional
investors) supply long term liquidity, and can hold large volumes of long-term capital.
Tamil Nadu Urban Development Fund (TNUDF)
Created as a trust fund with private equity and without state guarantees, TNUDF is the first such structure in
India. In 2000, the World Bank permitted it to avail the first non assured, unsecured bond issued by financial
intermediary. The proceeds from bonds are deposited in the fund, and subsequently lent back to the
participating local bodies as sub-loans to finance their infrastructure projects. Likewise, private operators can

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finance their PPP in education from organizations such as TNUDF, which can systematically pool in
securitized and unsecuritized loans and commercial papers to add money to the PPP project.
APPOINTING PRIVATE OPERATORS
● Selection process
Fundamentally, the PPP selection method should encompass transparent application, decision making and
review. To beckon more national and international competent bids, the government have a sound outreach
policy and should pre-identify schools that it intends the bidders to adopt.
Furthermore, the government should establish an accredited selection task force that comprises of eminent
educationists such as leaders/presidents from universities, civil society, private, ex-officio government and
philanthropy/ Altogether, they would empower the task force with the resources, information and skills
needed to design, develop and manage the complex contracting processes. There should be a multi stage
course of action in selecting education service providers, and these stages should include:
● Shaping goals of the contract, expected services and outcomes and formulating requirements.
● Evolving strategies to procure and hire teams;
● Writing the request for proposals and inviting expressions of interest;
● Supervising pre qualification checks of contracts by appraising or cross-checking the bids matching
the requisites;
● Interviewing contenders the shortlist of bidder, assessing proposals in greater depth, and negotiating
contractual issues with them;
● Awarding the contract and nominating the bidder
● Broadcasting the results of selection process;
● Commencing service
This selection task force should appraise propositions after accounting pre-qualification checks. Then they
would shortlist, interview desirable operators/bidders, and grade them based on a selection rubric.
Eventually, they should display the results publically speedily.
● Selection yardstick
A quality school arrangement should conceive a phase-wise avenue to student learning goals. Encircling an
instructional plan based on differentiated, curriculum, student needs, staff hiring, school culture, professional

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development and community engagement, this avenue would guide the users how to track progress and
report transparently via a data management. Likewise it would elaborate a levelheaded budget, where
expenditure preferences should be in tantamount with the school’s infrastructure and instructional plans.
● Fair and enforceable contracts
The PPP contract should explicitly characterize parameters that define the relationship between the
government and the operator. Additionally, it should chart the legal framework that governs the school
operations, financial partnership, and operator autonomy.
Contracts should specify prerequisites/requisites to evaluate performances and the school operators should
have the flexibility to turnaround affairs such as staff management including hiring, firing, training and
performance management of teachers; curriculum, pedagogy design; scheduling of timetable; rewards and
incentives for teachers; and the budget allocation.
● Evolve a potent communications strategy
Rather than piecemeal or ad hoc, effective strategic communication can extensively diminish political risk.
This plan is built on opinion research that gauges how the PPP initiative affects stakeholders. The results of
this plan can aid government in taking the next steps to support, promote participation, and mitigate social
opposition to, the private participation initiative.
Likewise, the government should enlighten stakeholders about the pros and cons of PPP, inform the general
public about the academic benefits that can accrue from involving private partners in education, and promote
best practices in developing and applying PPPs.
● Inspection and Evaluation
The contract should clearly define measurable and attainable academic, financial, operational and
organisational performance criterion, and third parties would rate the credibility of the outcomes, based on
the student’s achievements, behaviour and safety, teaching quality, school management and leadership.
This data provided by third party agencies would serve to redress grievances of operators pertaining to
quality issues, and intervention when schools underperform and don’t comply with norms.

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There should be a performance standard rubric that incorporates quantitative indexes such as standardized
test scores, attendance rates, and dropout rates, to evaluate the holistic progress.
Authorizers should monitor the school’s financial stability and viability via monetary parameters that elucidate
the fountainhead of fiscal data- evidence base of valuation.
Best evaluations comprise of experiments that randomly delegate benefits and include a true control group.
Other than using natural experiment or random design, operators could use rigorous techniques as
propensity score matching, local average treatment effects, and regression discontinuities.
Finally, authorizers should objectively gauge the school’s organisational health based on measurement
standards.These include qualitative measures through parents’ and teachers’ surveys and site visits by third
parties to assess progress in areas such as leadership development and quality of principals and teachers.
Teacher assessment, particularly could be based on expert in-classroom observations and student surveys.
● Authorize suitable performance measures, incentives, and sanctions for failing to perform in
PPP contracts
Quintessentially, performance measures actuate whether the service providers have fulfilled the agreed
terms and conditions of the contract, and whether they qualify to receive remuneration.
Assuming that the education authorities lack the capacity to audit contractor’s fruition of a project, the
sanctions and performance incentives will be deemed inefficacious. The audits should prevent fraud and
ensure timely completion of a project as convoluted as PPP in school management and school subsidy
program.
An exceptional risk that emanates in PPPs that receive per student funding is the harbinger for unscrupulous
contractors to inflate enrollment figures or to claim funds for schools that only exist on paper. Schemes
adopted to mitigate this risk involve school accreditation schemes, wherein contractors have to display
school enrollment data, and validate it with a third-party’s enrollment figures.
● Governance
The contract specify on what grounds to trigger intervention and types of action to undertake, including
timely applying evidence based procedure when contracts are violated or performance is deficient.

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Nonetheless, there should be a provision that allows reasonable opportunity and time for the school to
upgrade or remediate operations, provided they have technical assistance that meets the required
standards.
● Exit Framework
The contract should mention the circumstances for renewing the contract, financial penalty, authorized laws
and policies for early or late termination such as providers that underperform should be granted a year’s
notice before the contract terminates.
POLICY QUESTION TO PONDER
Which either of the two is the best instrument to fund a public private education?
● Supply-side financing -- Private schools acquire public money as per student grant.
● Demand-side financing -- Family directly get public money as vouchers for each student.
These two contrasting courses of financing private partners give varying incentives to PPP schools. A
pertinent question that sparks is which among the 2 methods of setting up PPP stimulates the school
members more?
Although research in this field is meagre, evidence proposes that supply-side funding has not generated a
fair outcome–it block grants to private schools and reduces learning outcome from children. Moreover,
aided-school teachers lobbied for the state government to directly pay them as public school teachers earn,
rather than wanting to be paid by the government grants paid to the private school operators. Other ways of
supply-side-funding of PPPs give greater impetus to schools and faculty. For instance, concession schools in
Colombia draw per-student public funding.
The Right to Education Act of 2009 had enacted a per-student financing model for PPP in education wherein
all private schools have to reserve 25% of the seats for students from deprived background, and the
government would compensate on a per student basis to the private schools for admitting the children.
Using a state-of-the-art impact evaluation methodology, evidence corroborating influence of demand- side
funding for PPPs via school vouchers to parents arises from Colombia, Chile, US and New Zealand. For

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example, as funds were scanty, the Colombian government issued school vouchers based on lottery. Then
they evaluated conditions of both lottery winners and losers (who were from similar background) after
randomly giving vouchers and sending their children to schools.

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