The education sector in India is often described as contradictory. While the government encourages private participation, it looks at it more as an act of philanthropy than as a legitimate field of investment. On the one hand, the state lacks adequate resources to meet the aspirations of a growing population; on the other hand, it restricts private institutions through overregulation, excessive affiliation norms, and rigid fee controls.
The issue is once again back in the centre stage with the passage of Delhi Private Schools (Fee Regulation) Act, which is being cited as one of the biggest achievement of the six-months-old Rekha Gupta government. While the Opposition, Aam Aadmi Party has called it to be a ‘monster’ act passed in connivance with the private schools, on the other hand the school owners have called the act draconian.
Delhi Education Minister Ashish Sood has said that he did not consider the private school owners to be their enemies but at the same time running a school could not be a business for earning profit. This has revived the debate on private participation in education sector but would not allow profit.
The private players call this a fallout of a ‘colonial’ mindset driven deep by a philosophy which enunciated the Societies Registration Act of 1860. Most of the educational institutions of the country today are administered through this act and similar trust acts.
The cornerstone of this act is the philosophy of ‘no profit, no loss’.
Almost eight decades after independence, Societies Registration Act 1860 remains among the few functional colonial laws.
The nature of a law passed by a colonial government doesn’t change with the composition of the government. This act remains one of the biggest impediments in private investments in education sector.
Though judiciary at times has tried to define the Act in the current context in at least three cases - TMA Pai (2002): “No profit does not mean no surplus,” PA Inamdar (2005): “Institutions can maintain surpluses, provided they are reinvested in education,” and Modern School case (2004): “Charging fees and spending them to improve quality is a right, as long as there is no exploitation.”
India spends roughly 2.9% of its GDP on education, much below the global average of 4.5–5%. This underfunding creates space for private players to step in. Currently, private institutions account for nearly 70% of higher education enrolment and an increasingly significant share in school education.
In Delhi alone, in terms of the number of students enrolled, the private sector participation is to the tune of almost 50 percent.
Yet, the prevailing legal and policy framework discourages them from functioning as professional enterprises.
Despite the definitions and interpretations by the judiciary, the approach of the government, largely moderated by the bureaucracy, has remained colonial, not allowing economic autonomy.
While the intent is to keep profiteering away from education, the result is an opaque system where private entities often charge “donations” or engage in indirect revenue models, a charge which is also brought against the private schools in the national capital.
If freedom in financial functioning is not allowed, these institution would continue to be funded by ‘charity’ and not investment. A strong, forward-looking policy framework must reconcile two objectives: ensuring education remains affordable and equitable, while also making the sector attractive for private investment.
Creating modern buildings, laboratories, or libraries require surplus funds, generating which is treated almost like a crime.
Institutions fear disclosing finances and instead resort to hiding their balance sheets. Education has per force reduced to ‘philanthropy,’ whereas it should have been the greatest investment for a nation.
The government has to make a clear distinction between “No Profit” and “No Private Profit”. Instead of blanket fee caps, adopt a banded model where fees are linked to institution quality and infrastructure. Independent audit mechanisms can prevent profiteering while ensuring financial sustainability.
This would allow institutions to generate and use surplus for labs, digital infrastructure, research, and teacher development. An atmosphere and a structure has to be created where institutions disclose their finances honestly, without fear.