Education Budget: HEFA raised no private investment or donation in 7 years; moved research funds to PM CARES

NEW DELHI: The Higher Education Finance Agency (HEFA) was intended to revolutionise higher education funding. Set up by the ministry of education in 2017, it was to get the private sector to invest in public educational institutions, mobilising Rs 1 lakh crore by 2022. Seven years on, it has raised exactly zero funds from the private sector – whether as equity subscription or corporate donations.

When HEFA was launched, the goal was to raise up to Rs 10,000 crore from the market to extend as infrastructure loans to public higher education institutions. The Revitalising Infrastructure and Systems in Education by 2022 (RISE 2022) project massively expanded its scope and revised the target upward to Rs 1,00,000 crore to be raised through a mix of government bonds and commercial borrowing. HEFA has borrowed, but found no investors.

Moreover, a third of its own corporate social responsibility (CSR) funds, intended for research, was handed over to the Prime Minister's Citizen Assistance and Relief in Emergency Situation Fund (PM CARES). The PM CARES was established during the COVID-19 pandemic and invited controversy as it was set up in parallel to the existing Prime Minister’s National Relief Fund. The funds do not fall within the ambit of either the RTI or public audit. In 2021-22 and 2022-23, the majority of HEFA’s CSR fund – Rs 9.31 crore of Rs 13.56 crore or, 68.7% – went to PM CARES.

A review of the functioning of HEFA by the National Institute of Public Finance and Policy (NIPFP), conducted from July 2022 to January 2023, noted the lack of corporate donations for HEFA until then. The report quotes HEFA management as saying,

By 2021-22, HEFA had sanctioned loans worth Rs 33,476 crore and disbursed Rs 13,935 crore to 85 institutions. By March 2024, HEFA said in a RTI reply, the sanctioned amount had risen to Rs 39,120.72 crore and of that, Rs 19,205.54 crore had been disbursed, still far short of target.

Even Canara Bank, ministry of education’s partner in HEFA, was disappointed with its performance by early 2023. “It is not getting the notional return that would be possible from alternate deployment of resources,” the bank told the reviewers. It even considered pulling out of HEFA. The review report is not publicly available and was obtained by Academia360 through an RTI query.

How HEFA works

The Higher Education Finance Agency was announced in the Union Budget for 2016-17. Its main goal was to wean public institutions away from government grants and move them toward infrastructure loans.

It was incorporated in May 2017 and is a joint venture between the education ministry and Canara Bank. It is a non-banking finance company and a non-profit in which the union government holds 90.91% of equity and Canara Bank, 9.09%.

With an initial corpus of Rs 1,000 crore drawn from these two partners, HEFA was meant to raise funds from industry and also seek CSR donations. The investments would then be passed on to public institutions such as the Indian Institutes of Technology (IIT), National Institutes of Technology (NIT) and others as infrastructure loans. The CSR donations would be given as grants for research.

“HEFA was born out of the vision of Prime Minister Shri Narendra Modi for providing additional finance for promoting research in the higher educational institutions,” said the government note on sanctioning of the first six loans to IITs Bombay, Delhi, Madras, Kharagpur, Kanpur and National Institute of Technology Surathkal.

The “invest in us” section of the HEFA website still promises “a win-win model for all the participants” and “visibility” in public disclosures of major institutions. But while investors have chosen to stay off, HEFA’s advent has impacted the education budget and the finances of institutions.

HEFA, research, PM CARES

The agency constituted its own CSR committee nearly two years after it was set up, on March 7, 2019. Since then, as part of its own CSR activities, it has earmarked Rs 24.84 crore for research and innovation in premier institutions. Of that, only Rs 15.5 crore actually went to research.

HEFA: Research projects and CSR funds

Source: HEFA website

In 2021-22, HEFA transferred Rs 415 lakh – Rs 4.15 crore – out of Rs 5.53 crore to PM CARES. In 2022-23, it transferred Rs 5.16 crore of its Rs 8.03 crore fund to PM-CARES. This is 37.5% of the total amount it has spent on research till 2023-24.

Its annual report for 2022-23 said: “There were no suitable proposals for spending the balance CSR amount of Rs 516.64 lakh. The committee decides the transfer balance amount of Rs 516.64 lakh to PM CARES Fund specified in Schedule VII of the Companies Act, 2013, for the purpose of CSR contribution.”

Since 2020-21, HEFA has sanctioned 41 projects, the most in 2023-24, 18 projects worth Rs 8.58 crore.

HEFA CSR donations

The NIPFP team noted that CSR funding for institutions is a relatively new phenomenon, and “most institutions have not even applied for CSR registration”.

“Funding through these channels may remain limited in the near future,” they concluded. They found that established institutions such as the IITs generate significant revenues from alumni and corporate donations but “most HEIs [higher education institutions], however, are unable to find many donors with large contributions”.

“Another proposal is to create sub-funds within HEFA, which is used to sponsor infrastructure in institutions with low revenue capacities. Again, the idea is to “visibly” recognise the donors’ contributions for infrastructure development,” the NIPFP report said.

In September 2023, the Parliamentary Standing Committee on Education, Women, Children, Youth and Sports had recommended that HEFA consider diversifying its funding sources beyond government allocations and “explore partnerships with private sector organisations, philanthropic foundations, and international financial institutions to increase the available funds”.

The committee also suggested allocating a portion of HEFA funds specifically for research and innovation grants to “incentivise institutions to undertake cutting-edge research and development projects and foster a culture of innovation within higher education”.

(This is the first of a three-part series on exactly how HEFA, which provides loans to public institutions for infrastructure development, has impacted higher educational institutions and students.)