Cupboard bare for nursery pupils

India Dispatch: A shortage of places at private primary schools in India is sending prices higher as the country struggles to provide education for its teeming youth.

Admissions to Indian nursery schools have turned into Darwinian contests, where the parents are scrutinised more rigorously than the children.
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Braving the crisp winter chill, they queued all night waiting for the gates to be flung open.

As the sun rose, the queue became longer, snaking all the way down a neighbourhood street.

The line could have passed for homeless people waiting desperately for food coupons, if not for the Louis Vuitton handbags and trendy sunglasses.

They were a group of parents waiting nervously to embark on the toughest challenge of their lives: having their children admitted to nursery school.

Until a few years ago, training their kids to recite rhymes and alphabets and mimic animal sounds would have got the job done. But with growing competition amid a surging population and a woeful shortage of private schools, nursery admissions have turned into a Darwinian contest.

Students are selected under a points system introduced in recent years, where the parents are scrutinised more rigorously than the child. Points are awarded for the child's knowledge of nursery rhymes, but also the parents' educational background.

More points are awarded if parents attended the school or if they live nearby.

The competition for points is fierce. The queue outside The Shri Ram School, one of Delhi's most esteemed educational institutions, was one of many outside India's 75,000 private schools in January, when the mad rush for application forms for this year's admissions started.

It has become an annual ritual. The fight for admission to the country's primary schools is like that at Ivy League colleges in the US - highly competitive and very expensive.

The annual fee for primary education at The Shri Ram School is about 150,000 rupees (Dh12,450), more than double the average fee charged by some of the most reputed engineering colleges in India.

It is considered exorbitantly high in a country with an annual per capita income of about 45,570 rupees.

Primary and secondary education constitutes more than half of India's 1.8 trillion rupee education sector, says CLSA, a research company based in Hong Kong.

A 2007 report from the UN Educational, Scientific and Cultural Organization showed university education, which is largely subsidised, costs less than half of what Indian families paid for basic primary education of their children.

India's education system, the report said, "runs the risk of excluding children from poor families".

Trident Microfinance, an institution based in Hyderabad, has tried to fix the problem by offering loans of between 300,000 and 1 million rupees to private promoters wanting to set up schools for families below the poverty line.

Trident's only condition is the schools should not charge a monthly fee of more than 400 rupees. It has so far financed 16 such schools.

But such rare efforts have not solved the shortage of private schools.

CLSA estimates that between 25 million and 30 million children are enrolled in private schools. That is more than double the number enrolled in government-run schools, which are widely criticised for a poor standard of education.

"People keep asking if there is such a huge shortage, then why new private schools are not coming up," Parth Shah, the president of the Centre for Civil Society, an independent research and educational organisation based in New Delhi, said last year. "The licence raj is to blame."

The process to start a school is fraught with red tape, Mr Shah says. A number of licences and regulatory clearances are required, which can take a long time.

"The licence raj has kept the supply of schools well below the demand and the existing private schools are milking the shortage," he says.

Mr Shah estimates private schools in New Delhi take 5 billion rupees a year from the admission process.

But a new trend of corporate funding in the education sector from this year is expected to bring change.

In March, the private equity fund Sequoia Capital invested 250m rupees in K12 Techno Services, a company in Hyderabad that offers a range of professional services such as curriculum development, infrastructure development and teacher training to more than 60 schools.

Last July, Sequoia Capital teamed up with Song Investment Advisors, another company in Hyderabad, to invest 750m rupees in K12 Techno Services, which expects to expand its network to 500 schools by 2015.

In February, the Housing Development Finance Corporation (HDFC) invested an undisclosed sum in Indus World School, a chain of co-educational schools promoted and run by the education company Career Launcher. In March, HDFC invested another undisclosed sum in Kaizen Private Equity, an education-focused private equity fund.

Renu Sud Karnad, the managing director of HDFC, says the company regards education as a "recession-proof business" that offers very "decent returns".

Also in February, Tree House, which runs a chain of nursery schools in Mumbai, filed a request for an initial public offering to raise 1.5bn rupees with the country's stock market regulator, which is yet to give its approval.

But the education business is fraught with regulatory risks.

India's Right to Education Act, which promises free and compulsory education to all children aged between six and 14, was passed last year and is ironically the biggest hurdle to corporate investments.

The legislation mandates all schools, private and government, reserve 25 per cent of its seats for children from poor backgrounds. Schools cannot directly charge these children and India's state governments are required to reimburse their tuition fee to schools.

But there is fear among schools as to whether state governments have the will and the funds to pay. There are many public petitions filed in Indian courts by education barons.

The future of investments in India's education sector depends on how the government tackles these regulatory risks, experts say.