Cabinet gives nod to Higher Education Financing Agency

The mandate of the agency would be to provide much needed funds to boost research oriented infrastructure for premiere institutions like IITs, NITs, IIMs and central universities.

The Union Cabinet, chaired by Prime Minister Narendra Modi, gave its nod to HRD ministry’s proposal for creation of HEFA on Monday. According to experts, the move will help in improving quality of research as the institutes would not afford to initiate any such research projects that which would not generate revenue.

“Now, both the management of institutes as well as researchers would be under ‘pressure’ to select only profit-making projects rather trying financially unviable ones,” a ministry official said, adding that the corpus fund of Rs 500 or more depending upon the capabilities of institutions to generate revenue would be provided in one go on the condition that they would have to return the fund in 10 years.

Adding further, the official said, “It’s their money only, which would be provided by the HEFA in much advance at some interest rate, which would be paid by the Centre and the principal amount would be the liability of institutions.”

On the matter, Union HRD minister Prakash Javadekar said, “HEFA would be jointly promoted by the identified promoter and HRD ministry with an authorised capital of Rs 2,000 crore of which government equity would be Rs 1,000 crore.”

The HEFA would be formed as a SPV within a PSU bank/government-owned-NBFC (promoter) and it would leverage the equity to raise up to Rs 20,000 crore for funding projects for infrastructure and development of world class labs in institutions like IITs, IIMs and NITs etc, Javadekar said.

The HEFA would also mobilise CSR funds from PSUs and corporates, which would in turn be released for promoting research and innovation in these institutions on grant basis, a statement released by the ministry said.

HEFA would finance the civil and lab infrastructure projects through a 10-year loan, the statement said, adding that principal portion of the loan will be repaid through the ‘internal accruals’ (earned through the fee receipts, research earnings etc) of the institutions.

When asked how HEFA would raise funds, officials said that it could be through bond market by floating education bonds or through debt market.  For joining as members, the Institution should agree to escrow a specific amount from their internal accruals to HEFA for a period of 10 years. This secured future flows would be securitised by the HEFA for mobilising the funds from the market.