India has notified regulations allowing foreign higher educational institutions (“FEI”) to set up campuses in the country in November 2023. A summary of the regulations with our thoughts is available here.
Like any other sector, a good understanding of the letter and spirit of the law and regulation, policy environment and the market is key for the education sector as well. Long-term strategy and vision will determine the success of foreign foray in higher education.
The University Grants Commission (UGC) has published a simple and light touch regulation, along with FAQs for guidance.
Based on our experience in the higher education sector and especially with our work with FEIs, we have prepared a key check list, which we hope will assist FEI’s with their planning and decision making.
Eligibility
The first item on the checklist should be to examine whether the FEI is eligible to apply for India campus. While the FEIs featuring in the top 500 (overall or subject-wise) list, published by global ranking (regulations don’t name the ranking; to be decided by UGC from time to time), qualify, FEIs possessing outstanding expertise in a particular area too can apply. The broad eligibility criteria thus leave the door open for many, rather than a select few.
Entity Form
This is most often a heavily discussed and debated point as it involves multiple considerations. The regulations do not prescribe any specific entity form. They only suggest that the FEIs should comply with Indian laws (including FCRA[1] and FEMA[2]) and submit audit reports annually to the UGC, confirming compliance (including with state law). Further, they allow FEIs to form joint ventures with Indian higher educational institutions and Indian companies.
This means there is structuring flexibility.
Couple of options:
- FEI can set up an Indian entity, which can be the applicant entity. It can be set up as a for-profit or a non-for-profit entity. There are some inherent challenges with a non-for-profit entity, which especially crops up when receiving overseas contributions. If the charter documents of the FEI require the objective of the India entity to be not-for-profit, suitable clauses (i.e. no dividends, no repatriations, etc.) can be built into the charter documents of the for-profit India entity to take care of such concerns.
- FEIs can form a joint venture with an Indian entity. FEI will need to have a controlling stake in such joint venture entity to meet the requirements under the regulations. The joint venture partners could range from EdTech platforms to real estate providers, or other service providers. A selection can be made basis the contribution (land, on-ground support, etc.) required to be made by the Indian partner, for the purpose of the joint venture. While the regulations permit a joint venture with an Indian higher educational institution (which would be set up as a Trust, society or not-profit profit entity in India), the essence of the regulations is that it is the FEI, which will have control over the academics, and campus related matters[3]. Hence, the role of the Indian higher educational institution in such a joint venture is not exactly clear and may evolve with time.
Courses to offer in India campus
There is some guidance available on this topic. FEIs have to offer courses that they offer in their foreign campus. They also have to offer the same curricula, pedagogy, assessment and other aspects, as that of the main campus, for the India campus as well. Further, any additional course can be offered only with UGC’s approval.
Thus, new courses or customized courses, for the India territory, aren’t allowed for now.
Further, given the broad definition of campus in the regulations, FEIs undertaking certification, research or other programmes (and not just degree or diploma) at the undergraduate, postgraduate, doctoral and post-doctoral levels have to do so via these regulations, with the UGC’s approval. Thus, offering of such programmes without due approvals may not work.
This, however, in our view, does not impact FEIs ability to offer online courses (not via the India campus) from abroad or in collaboration with platforms, or courses in collaboration with Indian higher educational institutions (twinning, dual or joint degree programmes) under the extant regulatory framework in India.
Campus location and infrastructure
A very important consideration for decision making is to choose the campus location wisely. India is a large country, with central and state specific regulations for education and land. Further, the regulations don’t overrule the applicability of other Central and State laws, or the applicability of regulations of statutory bodies (such as All India Council for Technical Education (AICTE) for technical education, Bar Council of India for law, etc.).
While the regulations do not specify any minimum land or infrastructure requirements, the UGC, state laws, as well statutory bodies often prescribe infrastructure norms. Location and infrastructure will be important factors for evaluating the application of the FEI as well.
Therefore, it might be prudent for FEIs to consider a few things:
- Seek clarity on applicability of UGC, state laws, as well as regulations of statutory bodies vis-a-vis FEIs and their operations.
- Choose location in states that have enabled higher educational institutions to flourish, such as by demarcating zones for educational institutions, making regulatory processes within states easy and accessible, etc.
- Evaluate if the joint venture partner could help with land and infrastructure, as the capex will be high.
Faculty
The regulations allow flexibility on this front. FEIs can recruit faculty from India and abroad, but must ensure that qualifications of the faculty in India are at par with the main campus. Further, international faculty appointed to teach at the India campus must stay in India for at least a semester.
Movement of foreign faculty to and fro from India, and long duration of stay in the country can result in tax exposure for FEIs in India (e.g. permanent establishment risk). Such arrangements will need to be structured well to avoid undue tax consequences.
Application and approvals
Once the groundwork is done, it is important to pay close attention to the manner in which the application is drafted, and the supporting documents (here) that are presented as part of the application process. This will form the bedrock for evaluation and approval by the UGC.
Application can be filed online anytime during the year via the dedicated portal here.
Approval process envisaged in the regulations appears to be straight forward. Most importantly, it’s time bound where one can expect a go ahead within a certain period of time. This should definitely give comfort to the Boards of FEIs who often worry about long approval timelines in India.
While each FEI will have their own set of questions and considerations, the approach of the regulator is positive, and the market in India is conducive. We feel optimistic that FEIs will do well in India in the long run. FEIs should, therefore, take advantage of this opportunity and be first movers in what promises to be a successful international foray.
For further information, please contact:
Aarushi Jain, Partner, Cyril Amarchand Mangaldas
aarushi.j@cyrilshroff.com
[1] Foreign Contribution Act, 2010.
[2] Foreign Exchange Management Act, 1999.
[3] FEI should have its independent campus with the physical, academic and research infrastructure and facilities required to conduct its academic and research programmes
