UGC’s draft regulations aim to increase transparency among private unaided institutes

Savio Tom and Anupam Shukla

Various regulatory authorities at central and state level have taken steps to regulate the fees charged by educational institutions. The fees of K12 schools in various states is already highly regulated. Some of these legislations are presently being challenged before certain High Courts and the Supreme Court.

The courts of our country have very clearly established the principle that while education institutions are allowed to set their own fee structure depending on the facilities and services offered by them, no educational institution is entitled to indulge in profiteering.

As of now, private, unaided universities in most states were free to define their own fee structures. However, with the increase in complaints of exorbitant fees charged by the private and deemed universities, including the capitation fees accepted by certain educational institutions, the University Grants Commission (UGC) is now seeking to regulate such activities as well. Pursuant to this, UGC had, towards the end of 2019, proposed the UGC (Fees in professional education imparted by private aided and unaided institutions deemed to be universities) Regulations, 2019 (Draft Regulations) and had sought comments and inputs from the public in respect of the same.

The Draft Regulations provide for regulation of fees charged by unaided and aided private institutions that are deemed to be a university under the UGC Act, 1956 (Applicable Institutions). It is pertinent to note that the proposed definition of Applicable Institutions does not appear include ‘private universities’ as defined under the UGC (Establishment of And Maintenance of Standards in Private Universities) Regulations, 2003. UGC is now considering the inputs received from the stakeholders on the Draft Regulations and proposes to roll out the final regulations soon.

The UGC draft regulations provide for the establishment of a ‘fee committee’ to decide the fee structure for such applicable institutions. The fee structure would be decided on the basis of the institution’s location, the average per-seat cost, quantum of government aid received. It will also look into provision for reasonable surplus of revenue over and above the average per-seat cost which may be sufficient for being retained for development of facilities for quality education and for the expansion of the institution.

Every educational institution is required to submit their draft fee structures to the fee committee at least six months prior to issuing advertisement for admissions. This has to be accompanied with data, documents and audited accounts on the basis of which the institution has arrived at the fee structure. The Fee Committee is free to call for such additional information from the institution as it deems necessary for its evaluation of the free structure. The fee structure confirmed by the Fee Committee shall be valid for a period of three years and any subsequent changes in fees shall be applicable only in respect of the new admissions.

In the event of non-compliance with the fee structure prescribed by the Fee Committee, a penalty of Rs 10 lakh is proposed to be imposed on the Applicable Institution in addition to imposition of an order for refund of excess fees collected. The fee committee is also authorised to impose punishments as provided under Section 24 of the UGC Act, 1956.

The draft regulations prescribe that any surplus revenue generated by such Applicable Institutions shall only be utilised for development and expansion of such Applicable Institutions and expressly prohibits diversion of such surplus revenue for any other purpose. Further, the draft regulations 2019 also prescribes the manner in which the fees collected are to be segregated and accounted for. If implemented, these regulations will require the Applicable Institutions to ensure that their internal accounting policies are revised to align them with these requirements under the draft regulations.

The draft regulations aim to increase transparency and accountability in the manner in which private unaided deemed universities are administered in India. They also strictly restrict the collection of capitation fees to ensure that no one is able to purchase an admission to educational institutions merely on the basis of economic strength alone.

However, the private unaided institutions have always maintained that since they are not accepting any funds from the government, the governmental authorities must only perform a supervisory role vis-à-vis such unaided institutions and allow them to self-regulate. However, this argument has not been very successful with the courts and the government. States like Gujarat and Kerala have already instituted provisions regulating fees of the unaided medical and engineering colleges.

Similar to the situation with the K-12 schools, an appropriate balance must be achieved with regards to fee regulation so that the educational institutions are not able to indulge in profiteering. At the same time, they should not be bogged down with over-regulation.

The private unaided institutions, on their part, can consider undertaking the following steps in this regard. This could include instituting a transparent fee regulation mechanism, determine fees well in advance and publish the same on their website before the commencement of admissions. They could also provide suitable visibility to their students vis-à-vis any increase in fees down the line in advance.

Institutes can ensure that such fee increase is justifiable against the additional facilities provided, always avail services in a transparent and arms-length basis.

Tom is Associate and Shukla is Counsel at Pioneer Legal