Don't throttle private schools

Nursery admissions for 2019 in Delhi’s private schools opened two weeks ago. The gold rush ends in the first week of March. Until then, parents remain tense; so too the school admission committees that have to cope with an elaborate points-based system.
 
Arguably, private schools vary both in quality of service provided and fees charged. Certainly, there is self-selection, namely, parents choose schools depending on what they can afford. But, the stampede is across-the-board. Parents’ revealed preference is clear. First, private schools are preferred to government (publicly-funded) schools. Second, there is excess demand for all private schools, irrespective of the fees and quality of services provided. Third, a 25 per cent quota exists for the economically weaker sections (EWS) and admissions are lottery-based. They, too, overwhelmingly prefer a private school to a government school.
 
To most, the policy response would seem straightforward. First, radically improve the quality of education in government schools. 
 
The Delhi government has made a highly commendable effort to upgrade infrastructure and teaching in government schools. This will result in better learning learning outcomes and improved quality of education services. But it will take time.
 
Second, increase the supply of private schools and encourage competition amongst them in service quality. Here, the government has faltered. It has not enabled an increase in the supply and its regulation of private schools is limited to fees. This borders on the absurd. But first, some background to fee regulation.
 
Over the last few years, many states have taken to regulating fees charged by private schools. This was in response to parents’ protests about the regular and allegedly arbitrary hikes in school fees. Many statutes stipulate that a District Level Committee headed by a Judge and comprising civil servants (responsible for the government school system) shall decide on the permissible increase in fees and the fees shall stay in force for three years. Other statutes envisage a cap (8-10 per cent) on the increase in fees. For instance, in Madhya Pradesh and Punjab.
 
The Supreme Court has ruled that private schools can earn a reasonable surplus for furtherance of education but cannot “profiteer”; regulation (fee fixation) is not an infringement on the school’s autonomy but fixing a rigid fee structure would be an unreasonable restriction on the autonomy of the school. 
 
Fees in Delhi’s private schools have not been raised in three years; in some schools for even longer. The Delhi government has put a freeze on any fee hike. The same government has exhorted and then directed private schools to pay teachers as per the 7th Pay Commission. Many schools raised teachers’ salaries but are now in a jam because fees are frozen. Forget earning a reasonable surplus, many schools are simply broke. And, it can be argued that the fee freeze is precisely what the Supreme Court has ruled to be an unreasonable restriction on the autonomy of the schools.
 

Some stylised facts. The vast majority of private schools in India are low-cost and parents choose them of their own volition over “free” government schools. As they offer instruction in English, they are a major draw. Learning outcomes in private schools are better than in government schools (ASER). The onerous requirements of the RTE Act resulted in the closure of many low-price schools. Other private schools are struggling because 25 per cent of the students (the EWS group) are not required to pay school fees. Lastly, teachers in private schools are paid far less than their counterparts in government schools (not even counting the pensions government teachers get).
 
The consequences of Delhi’s Kafkaesque “regulation” are dire. First, more of the low-cost schools face closure. Even others are in serious trouble. Perversely, reserves cannot be drawn down to pay for salaries and other recurring expenditure — those have to be met by fees collected. Second, the only way to balance the books is to raise the student teacher (S-T) ratio, that is, raise the number of students per class. The outcome: Fewer private schools (because of closures) exacerbating the excess demand problem; a decline in the quality of learning as the S-T ratio rises; adverse impact on primary school — that is where S-T ratios are the lowest. The irony: The worst hit will be parents seeking low-cost schools — those will go belly up first. “Regulation”, where input prices and output prices are “fixed” by government, is a throwback to the Soviet era.
 
Private schools are mandated to ensure that EWS students (25 per cent) do not pay any fees. The law obviously envisaged that paying students would cross-subsidise the EWS students. Surely, schools cannot be expected to simply absorb the costs; the tariff for paying students had to be raised to provide the “cross-subsidy”.
 
Further, costs rise annually — for instance, maintenance, school supplies and DA for staff. The cost of the infrastructure and land also rises annually. The latter directly impacts new schools. If these are not factored into a fee increase, there is no incentive for entry, and the excess demand remains unmet.
 
A simple solution: Permit schools to raise fees by up to 7 per cent every year; only schools seeking an increase above the ceiling need to approach the government for approval/clearance; schools can increase fees only prospectively; and, where fees have not been raised for three years or more, schools may compound the increase over the period.
 
Delhi’s experience holds valuable lessons for other states. Most certainly emulate its effort to improve government schools. But tread carefully while regulating private schools. Focus on quality of education and bring a degree of reality to fee regulation.
 
Our public-funded government schools will take time to become the “go to” schools and quality institutions. Meanwhile, don’t kill the schools that seem to be doing what they do well — deliver education for a price. The writer was an IAS officer of the AGMUT (Delhi) cadre for close to 40 years