Restrictions on for-profit education in India mainly stem from Supreme Court verdicts, Model and state Right of Children to Free and Compulsory Education (RTE) Rules, and board affiliation norms.
Supreme Court Verdicts
For both K-12 and higher education, the following two court judgements regulate the ability of educational institutions to run for-profit.
T.M.A Pai v. State of Karnataka, 2002: The Court directed that educational institutions could make a “reasonable surplus”2 but disallowed profiteering and charging capitation fees. It argued that “reasonable surplus” to meet the cost of expansion and augmentation of facilities did not amount to profiteering.
Higher Education Legislation
University Grants Commission
The University Grants Commission (UGC) Act 1956 does not explicitly restrict for-profit education. But Section 26(1)(g) of the Act grants UGC the power to regulate the “maintenance of standards and the coordination of work or facilities in Universities.” This can potentially allow UGC to regulate fees in higher education institutions. Recently, UGC released draft regulations governing the fee structure in private aided and unaided institutions under this provision.
School Education Legislation
Model RTE Rules
For K-12 education, the RTE Act 2009 requires private schools to fulfil certain norms and requirements to obtain a Certificate of Recognition. These schools cannot operate without this certification. Though the RTE Act 2009 does not mention restrictions on schools run for-profit, its Model Rules require schools to be non-profit in order to qualify for recognition. According to Rule 11(1)(b), every school applying for recognition should submit a self-declaration showing that they are “not run for profit to any individual, group or association of individuals or any other persons.” This restriction is replicated in several state RTE Rules.
State RTE Rules and fee regulation Acts
States restrict the kind of schools that can apply for recognition through their RTE Rules. Schools that can apply for recognition generally have to be run by the following entities:
- Societies registered under the Societies Registration Act, 1860 or under state government Acts for educational, religious or charitable societies
- Registered Trusts or
- Companies registered under Section 8 of the Companies Act 2013 having education as one of its objects
Only Haryana has allowed for individuals or a group of individuals or companies registered under the Companies Act 2013. Rule 12(1)(a) of the Haryana RTE Rules 2011 states that the following entities can open a school in the state
- Individual/association of individuals/firm/society registered under the Societies Registration Act 1860
- Trust created under the Indian Trusts Act 1882
- Company registered under the Companies Act 1956
States such as Maharashtra (Section 11(1)(b)) and Delhi (Section 14(1)(b)) also clearly mention that schools should “not run for profit of any individual, group or association of individuals or any other persons.”
While many states pass orders and notifications to regulate fees in schools, 11 states in India have stand-alone Acts that govern school fees. The Punjab Regulation of Fee of Unaided Educational Institutions Act 2016 is the only such Act that explicitly regulates profit-making by schools. It constitutes a Regulatory Body for regulating fees at the divisional level. Under Section 7, one of the functions of this Regulatory Body is to “check excessive hike in fee by an unaided educational institution with the motive to earn profit.”
Board Affiliation Norms
Affiliating boards such as the Central Board of Secondary Education (CBSE) also impose restrictions on how schools can operate. We look at two such examples below.
Central Board of Secondary Education (CBSE) Affiliation Norms
Similar to State RTE Rules, Section 2.1.8 of CBSE Affiliation Bye-laws 2018, states that the CBSE may affiliate the following categories of private schools established by:
- Societies registered under the Societies Registration Act 1860 of the Government of India or under the Acts of the State Governments as educational, religious or charitable societies
- Registered Trusts or
- Companies registered under section 8 of the Companies Act 2013 having education as one of its objects
Council for the Indian School Certificate Examinations (CISCE) Rules for Affiliation
Rule 2(a) of the CISCE Rules for Affiliation 2016 states that the school should be “run by a Registered Society, a Trust or a Company (under Section 25(1)(a) of the Companies Act 1956 or as amended) for educational purposes. It must not be run for profit.”