‘First-of-its-kind’: IIT Madras, IIM Udaipur, IIIT Nagpur hostels to be built in PPP-mode

NEW DELHI: Indian Institute of Technology (IIT) Madras, Indian Institute of Management (IIM) Udaipur and Indian Institute of Information Technology (IIIT) Nagpur will soon have private companies building and operating student hostels on their campuses.

In a “first-of-its-kind” arrangement for higher educational institutions, the hostels will be built as public-private partnerships (PPP). The fee will be set by the institute but revised 4% on a year-on-year basis and collected by the private company. The project will be executed on the "design, build, finance, operate and transfer" (DBFOT) basis.

The private party can also generate revenues in other ways. In IIT Madras, they can earn from running cafeterias and vending machines and cleaning rooms and sports facilities on request; in IIIT Nagpur, the private concessionaire can earn interest on deposits made for electricity, water and mess charges, “lease rental from utility shops” and “canteen facilities”, says the record of a meeting of the Public Private Participation Appraisal Committee (PPPAC), under ministry of finance’s department of economic affairs, held in late October.

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As noted in the record of that meeting – Careers360 has a copy – the PPPAC typically considers only projects valued at over Rs 250 crore. It made an exception of the hostel projects on the request of the DHE because “these are first of its kind projects with no precedence in the education sector; and…it requires EC [Empowered Committee] consideration for the VGF [viability gap funding] support.”

The minutes also say that “This will not only save time and expedite the projects but will also set a template for undertaking more such projects." The combined cost for all three projects is Rs 584.93 crore.

The meeting was to consider selecting the private partners. According to the Financial Express, the projects were approved earlier this month.

Hostels for MBA, PhD, BTech students

All three proposals placed before the PPPAC were hostel projects but for different groups of students. Each institution seeks to expand capacity for students.

For instance, IIM Udaipur plans to increase MBA and PhD student intake and expand the executive programme by 2027-28.

Similarly IIT Madras, through this, aims to address the issue of hostels for Phd and project staff of 750 people on campus. IIIT Nagpur is the only one which plans to accommodate undergraduate students – 2,400 of them – as well as 200-250 Phd students by 2027-28.

Details of what each institution has proposed are given below.

Projects at IIM Udaipur, IIT Madras, IIIT Nagpur

The construction period ranges from 18 to 30 months.

IIT, NIT, IIM Hostels: Rs 580 crore, student fee and revenues

The government of India will provide partial funding for the projects with the rest coming from the private investor. The estimated cost of each project is given below:

• IIIT Nagpur: Rs. 87.54 crore

• IIT Madras: 396.96 crore

• IIM Udaipur: Rs 100.43 crore

According to the record of the discussion, 50% of the funding will be from the government, through the Viability Funding Gap scheme, under the department of economic affairs (DEA).

VGF Grant scheme provides up to 60% of the total project cost for social sectors, including education, health, water treatment plant and solid waste management

The records of the meeting indicate that the main revenue stream for these projects will be from student fees through hostel fees, mess and cafeteria charges, electricity, water and other utility charges and other facilities offered within the hostels.

In the case of research scholars, the fee will be set after considering the house rent allowances they receive, the institutes and department told the committee.

‘Proper segregation’ between VGF and HEFA

Before the viability gap funding scheme, the ministry of education had attempted to fund higher education expansion through another never-done-before system – the Higher Education Finance Agency.

Set up a non-banking finance agency with Canara Bank in 2017, it was meant to raise private funds and extend infrastructure loans to public institutions like the IITs, IIMs and IIITs to build. Many of the projects proposed for HEFA loans were also student and staff residences and ultimately caused fee-hikes . In the first seven years, HEFA had raised no private funds whatsoever , showed a review of the body by the National Institute of Public Finance and Policy (NIPFP).

At the PPPAC meeting, the department of expenditure was the only one to mention HEFA.

According to the record, it said: “A clear distinction may be made by the DHE between projects eligible for HEFA funding and those that can be supported through a VGF grant. Proper segregation between these two mechanisms may be ensured to avoid overlap and ensure that each project is aligned with the appropriate funding source."

To this the department of higher education simply explained: “HEFA provides loans to higher education institutions, while the institutions raise funds. VGF, on the other hand, offers partial government funding to attract private sector efficiency and investment including project finance for the project."