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Education is the single most important instrument for social and economic transformation. A well educated population, adequately equipped with knowledge and skill is not only essential to support economic growth, but is also a precondition for growth to be inclusive since it is the educated and skilled person who can stand to benefit most from the employment opportunities which growth will provide  . Realizing the importance of education, there have been gigantic efforts to take primary education to every child in India. Sarva Shiksha Abhiyaan has been instrumental in Universalization of primary school education and Rashtriya Madhyamik Shiksha Abhiyaan is aiming for the same level of achievement in secondary school education.
At the heart of it, the current Indian education policy is about the three E's. These three E's are Expansion, Equity and Excellence. Having achieved expansion to a significant level in 11th plan, the focus is now towards the excellence and quality improvement. Also, there has been a fundamental change in the outlook towards education with shift of focus from input-based improvement to measurement of outcomes. Most of these changes are welcome, or at least the spirit with which they are being promoted is fair. To improve quality, there are efforts required on multiple fronts.
First of all, the quality improvement requires scalable models of teaching. One of the biggest bottlenecks in teaching quality improvements has been the lack of training for the teachers. Given the daunting task of providing quality education to millions of children in a short span of time, use of technology has become essential. Technology will also provide with scalable models of teaching. For example, private schools are moving from traditional black board to digital content to enhance effectiveness of teaching. Some of the schools have outsourced installation and maintenance of IT hardware, content and training to private parties on BOOT model. Technology will also have a great impact in measurement of outcomes as well with large scale transparent assessments becoming a possibility. However, there are major challenges on the supply side, especially related to governance in schools.
As has been often said, the Indian education system is over-regulated & under-governed. Because of education being in the concurrent list, there has been multiplicity of authorities and boards each doing its own thing. In fact, a common national curricular framework was not arrived at until 2005. It is true that accountability is necessary to ensure performance of schools. However, for the most part, a strict process approach has been taken instead of measurements of outcomes. In fact while India has been proactive on liberalization, education has remained largely untouched by the meaningful reforms. Out of the 1 Million schools that run currently, only 75,000 are in private hands with far higher enrolment per school ratio compared to govt. schools (1200 vs. 175).
While the quality of teachers is in question on one hand, the quality of school management is another grey area. Because of the non-profit nature of the school education in most of the states, all kinds of creative solutions are being used to subvert this rule. Yet the quality of schools has not gone up despite growing fees and secretly taken capitation fees. Some of these schools are run by politicians and lack of professional management affects quality.
It is widely accepted that the role of the local community is minimal in ensuring the quality of education. National Knowledge Commission, in its letter to Dr Man Mohan Singh, says that the current inspection system is overburdened and inadequate, with a small number of inspectors required to cover a large number of schools, often spread over wide physical areas. The solution does not lie in simply expanding the system - rather, we need to develop systems to ensure meaningful monitoring. The strategy for the revitalization of the school inspection system should include local stakeholders in the monitoring of schools, whether in the form of Village Education Committees, parent associations, or other such bodies  .
In this report, we will first look at the different governing structures present in the country today and then will explore a possible role for cooperatives to take quality education to every nook and corner of the country.
School Governance Structures
As mentioned previously education in India is a part of the Concurrent List which means that the Centre and State governments have the jurisdiction to regulate on it. This happened in the 42nd Amendment in 1976 prior to which education was a subject within the control of the individual states.
Schooling in India based on the British system of education with education till 12th standard and board exams at 10th and 12th levels. The education sector in India has evolved since independence into a large industry and can be broadly classified based on four dimensions:
School and College education: This includes kindergarten (usually children enter at age 3) where after spending 2 years the student will continue on to 12 years (termed as K12 schools) of schooling before he/she is ready for higher education. The so called Higher Education Institutes provides undergraduate, graduate and vocational level university education.
Public education and Private education: The government funnel more than 90% of spends on Public education into school level education. Private participation in the education sector is usually in the form of trusts (more on this later) which run what the so called private educational institutes.
Formal and Non-formal education: This includes but is not limited to preschool education, training of corporate employees, tutoring for school subjects and test preparation for exams such as JEE, CAT etc. The formal education is consists of primary, secondary and higher education imparted by various educational institutions which may or may not be recognized.
Classification by Funding: K-12 institutions can be classified based on management and funding as government, private aided, and private unaided institutions. Private aided schools are managed by private entities but are funded by the government. The Ministry of Human Resource Development (HRD) further separates government institutions into institutions run by the central or state governments, and schools run by local bodies. Government schools constitute over 75% of educational institutions.
Schools are also classified as pre-primary (Kindergarten and nurseries), primary (Standard I to V), upper primary (VI to VIII), secondary (IX and X) and senior secondary (XI and XII) schools based on the level of education.
An oft repeated opinion about the education sector in India is "[Education] is one of the few sectors that are still in the throes of the Licence Raj"
Structure of Education
The core school education is regulated by state boards, Council for the Indian School Certificate Examinations (CICSE), National Open School system and Central Board of Secondary Education (CBSE). Schools may also be affiliated to international boards. The National Open School was started in 1989, to provide education to the students, who fail to attend formal schools. Technical education is governed by the University Grants Commission (UGC) and the regulatory bodies such as the All India Council for Technical Education. The scope of our present study is limited to schools.
Government Regulation of Schools
Schools in India can only be owned by a society or not-for-profit trust or the government (although profit schools are allowed in Maharashtra and Haryana). There is no body on a central level to regulate and license schools in the K12 space so regulations can vary widely state wise. A student can continue with further studies beyond the 12th grade if his/her 10th or 12th grade scores are from an institute affiliated to a board recognized by the government. This implies that all K12 institutes must be affiliated to an education board which could be any one which as mentioned above. Some states like Maharashtra and Haryana have allowed "for-profit" school but the stand on boards of running a school as a society/ trust is clear in their guidelines. It may be mentioned that a school can be affiliated to a board but then it needs to secure a clearance from the state and must follow any rules of the state. This implies that even though a school may be offering an International Baccalaureate (which does not mandate that a school should be 'non-profit'), state laws would prevent the school from being operated as a profit entity.
Classification of Schools
Education is seen as a 'social' good in India. Schools are thus a state responsibility and should be operated without being affected by profit motives. Schools can be established as societies as detailed in the Societies Registration Act 1860 of Government of India or under some relevant Acts of the state government. Charitable or religious societies are allowed to run schools having non-proprietary character and can be governed as trusts (governed by Registration Act, 1908). Finally a school maybe a "non-profit" company registered as per the Companies Act, 1956 (some states like Haryana and Maharashtra allow 'for-profit' activity in the segment). The Society or Trust running a school cannot invest the profits generated in running one school into some other school but the money has to be kept for the school  itself. It also cannot distribute dividends to members of the society. This plethora of regulations and laws has led to creation of innovative structures. Of course schools operated by the state are very strong controlled. Teachers must be government employees; the number of hours of classes, days of teaching per year is all laid out in the respective school laws.
The ministry of human resource development does not have clear laws on regulation of international schools which are usually affiliated to foreign boards like Cambridge International Examination or International Baccalaureate. In 2008, the ministry approached the Cabinet with a proposal for a policy framework (and not a regulatory framework) which required that proposal to set up international schools to be approved by appropriate authority. Every school would have to get their proposal scrutinised by a mandated authority with a number of people from the centre, state governments, Indian education boards etc. However, a final decision on this has not been taken. From 2 IB-affiliated schools in 1998 now there are more than 400 school affiliated to foreign boards in India.
The centre and state affiliation regulations set out conditions on the basis of which recognition or affiliation is granted to a school. The following are the extracts of a few affiliation regulations or bye - laws which state that this requirement is to be followed mandatorily:
The Guidelines for Affiliation by the Council for the Indian School Certificate Examinations
"At the 14th Meeting of the Council held in October 1967 the Council approved the following conditions for schools seeking affiliation to the Council:
The school should be operated by a Registered Society or Trust and one of the principal purposes of such Society or Trust must be Educational.
Each school must have a properly constituted Governing Body."
Further details which are mentioned in the affiliation laws state that the school should be run by a registered society, trust or a company incorporated under section 25(1)(a) of the Companies Act, 1956 for educational purposes and must not be run for profit and the members of same family or individuals should not be in control.
The Central Board of Secondary Education (CBSE) Affiliation Bye - Laws
Chapter III on the Norms for Affiliation states that "The Board may affiliate several categories of schools all over India and abroad, as for example:
Government or Government aided schools;
Schools run by autonomous Organizations under the Government like Kendriya Vidyalaya Sangathan (KVS), Navodaya Vidyalaya Samiti (NVS), Central Tibetan Schools. Organisation (CTSO), Sainik Schools Society etc;
Schools run by Government Dept. directly like Defence, Railways etc.
Schools managed directly by Public Sector Undertakings or by reputed societies for Public Sector Undertakings under the financial control of such Public Sector Undertakings or by Societies formed by such undertakings.
Private, unaided schools established by Societies registered under the Societies Registration Act 1860 of the Government of India or under Acts of the State Governments as educational, charitable or religious societies having non-proprietary character or by Trusts or by companies for a non-profit purpose."
To summarise, the following are the characteristics of different school levels:
Not allowed except in Maharashtra and Haryana
Not allowed except in Maharashtra and Haryana.
Required (except in some states like Punjab)
Required (except in some states like Punjab)
State Dept. of Education, City Municipal Dept., Society Registrar, NCERT
NCERT/CBSE/ICSE/ State Board/ IB/ Open School (for course affiliation)
School Structure Applicable at Various Levels
Models of School Ownership
Given the strict norms on school ownership, most of schools in India are standalone schools. Individuals can either set up new projects or buy out the trusts of existing schools. Schools can apply for subsidized land reserved the state development boards for schools. To improve economic viability, some entities set setting up schools in joint ventures with property developers.
There are various chains which are affiliated to a parent society (like Don Bosco Schools, Ryan International School, and Delhi Public Schools (DPS) etc. Each of these franchise schools have slightly varying models of how they run. We have focused on the DPS model to understand how a normal society run school can be turned into a franchise model.
The Delhi Public School Model 
The most widespread chain of schools in India is the Delhi Public School system. There are over 150 schools around the country which are labelled as DPS. The Delhi Public Schools Society was established in 1937 and registered as a "non-profit, non-proprietary, private, educational organisation" to promote pre-primary/nursery to class XII education. DPS operates on a franchisee model. Academic and infrastructure standards are maintained by the DPS Society's 11 owned schools (known as 'core schools'). These are expected to be replicated by franchisees in terms of infrastructure and other aspects such as teacher training and provision of holistic education. DPS does not publish a standardised affiliation manual. Affiliation applications are assessed by the society's chairman assisted by two or three trustees and the society's director. Subsequently short-listed applications are negotiated bilaterally between the chairman and trustees.
Under a typical affiliation agreement between the society and the applicant of a DPS franchise, the chairman of the franchised school's board of management has to be a DPS Society member and the majority of board members have to be society members. The principal is appointed by the DPS Society, with the promoter of the franchised school designated vice chairman. The chairman and office bearers of DPS society maintain constant contact with affiliated schools by attending their board meetings and discharging other supervisory roles. The promoters of the franchised school have to adopt standardised infrastructure, teacher training, and tuition fee norms of the DPS Society's owned schools in Delhi. DPS Society's affiliation requires franchised school managements to pay an annual affiliation and services fee. While the DPS society has a strong presence on the management boards of franchised schools, but within the enabling framework of the society's rules, individual schools have considerable operational autonomy.
Getting Profit into the Picture
There are innumerable schools around and level of fees charged has risen significantly in the recent year. No business will exist if the promoters cannot extract surplus. After research we have found out that apart from running purely as per legal mandate, individuals and companies have found ways to circumvent the loophole of 'non-profit'. It may be mentioned that for a long time, corporate involvement in the education sector was related to philanthropy. Groups would set up schools and colleges for their employees and this was also required because the factories are located in distant or rural areas. Typically educational institutions run on a dual structure. This bypasses the 'trust/ society' regulation and enables promoters (who maybe corporates) to earn profits from their school venture. This section examines the 2 most popular methods.
Asset-heavy business model 
In the case of an asset-heavy model, apart from establishing a school as a trust/society/section 25 companies, the private education company/ promoter creates two separate companies: an infrastructure company and a management company. The infrastructure company owns the land, school building etc. These items are provided to the trust on a long-term lease basis and in turn the trust funnels in the profit as rental or lease fees. The management company provides the trust with services such as content, training of teachers and charges fees. These contracts are generally long-term - a minimum of 30 years to ensure that the boards do not raise any objection. The trust hires the teachers and provides him/ her salary.
Revenue is recorded in the accounts of the trust and is transferred to companies by way of lease rent and management fees. This model works on the legal grey areas but it has been in usage for quite a few years and as such government has not created any regulations to control this.
The transactions between all the parties in this structure must be done as professionally as possible and. This is a model followed by the recent corporate entrants into the school space - such as Educomp and is now extremely popular.
Asset Heavy Model
Dry management - Asset-light business model
Interested promoters may approach local partners that having the ability to invest in infrastructure. The promoter manages the operations of the school and gets management fees in turn from the Trust which may be a body composed of the promoter and infrastructure provider. For e.g. Manipal K-12 enters into a management contract with various school trusts. It then runs controls various aspects of the school: principal, faculty appointment, teacher training, curriculum design etc. The trust pays the company 20 to 80% of the fees collected.
Management Model (Local Partner May or May not be utilised)
Despite the "for-profit" operational permission to companies in Haryana and Maharashtra, tax exemptions and land concessions to schools run by trusts and / or societies imply that companies have not fully gotten into this sector.
Pre-Schools in India
As against the K12 education, there is no regulatory body for pre-schools, no 'non-profit' condition, affiliation requirement and allowance of 100% FDI into the sector. This sector stands at nearly 1 Billion dollars in size having grown at rates above 30% in past 5 years.
History of Co-operatives
Co-operative movement in India is one of the largest movements in the world. Co-operative movement has made tremendous progress in every aspects of the Indian economy. Co-operative activities occupy a major place in the sphere of the Indian economy. Initially, the co-operative movement was started with a limited scope of activities of rural credit but now it has entered in all fields of economic activity with social essence.
Various types of co-operative societies with their activities in India could be classified in the following categories;
Production Co-operatives- these co-operatives deal with agricultural and industrial production, such as- Farming Co-operatives, Industrial Co-operatives and Processing Cooperatives.
Marketing Co-operatives- these co-operatives are concerned with the marketing of agricultural produce, such as- Agricultural Marketing Societies and Consumer Cooperative.
Service Co-operatives- deal with the services necessary for their members, such as- Cooperative Credit Societies and Co-operative Banks, also the Housing Co-operatives,
Allied Service Co-operatives- these co-operatives are concerned with all activities which are necessary for daily life and business of the agriculturists, artisans, etc.
Given the wide-scale impact the co-operatives have had in different activity areas, there are many further challenging areas such as healthcare and education where co-operatives can play a greater role.
Why Educational Co-operatives?
Educational co-operatives can go beyond just the financial welfare of the teachers. The need of the hour is to ensure that the quality education reaches all parts of country. As noted by NKC, local communities have a significant role to play as they are the primary stakeholder in education of their children.
Given that such creative models are being used by the corporates and the private players, one question that we ask in this report is "Is co-operative education the right way to balance the "social inclusion" and "sustainable growth of quality education" in India?
In U.S., educational co-operatives have been in existence for a long time. The structure and scope of education cooperatives vary widely, reflecting the diversity of educational institutions in the U.S. Different models that are followed in U.S are  :
Educational institutions may cooperate to leverage collecting purchasing power.
There are parental cooperatives which deliver education to the children of the members. Control over all aspects of the operations is exercised by the parent body.
Teachers have also formed cooperatives to address their own needs
Even within Bangalore, the second model mentioned is well-known. Since its inception Bangalore International School has remained a wholly parent owned school. BIS's has five parents of students currently enrolled in the school on the school board and the board looks after the governance of the school.
We will now look at different reasons why educational co-operatives will play a big role in India:
As mentioned previously, the lack of quality education in semi-urban and rural areas is a big problem. With growing awareness about education and its importance for the future of their children, parents are spending more and more on education.
However, parents have no role in ensuring that the quality education is delivered. Many of the "English Medium Schools" that have come up in rural areas are worth investigating. With lack of quality teachers, it is almost impossible to raise quality standards.
This is why the schools in rural and semi-urban areas should become technologically innovative with the government help. Given that many educational entrepreneurs have come up to address academic issues such as content and assessment, running school now requires good intent first and foremost in such areas.
The experiments in U.K. suggest that co-operative schools have a huge impact on quality  . Further, the co-operative trust model embeds co-operative values and principles into schools. These include transparency, democratic decision making and accountability for all stakeholders. Involvement of the wider community in the running of the school, including local residents, trusts, teachers and parents, through membership of a council is very important aspect of this model.
Even in Maharashtra, Buldhana Urban Co-operative has established many schools in rural areas through the funds generated by its financial activities.
Governance Structure of Co-operatives
Based on above discussion, we propose that the following governance structure can be established:
A two-tier structure wherein a community trust/a co-operative and a third party are stakeholders in the functioning of the school.
Trustees are nominated by the co-operative members. A co-operative is established with members contributing to the fund. Loan disbursement for educational purposes is the priority lending and fees are directly transferred to school. The interest is paid by the loan-holders to the co-operative which can distribute the dividends to the members.
A third party in the form of educational services provider (for content, assessment, technology) is brought in to ensure that quality of education is benchmarked against the best in the country.
The trust is responsible for recruitment of teachers and overall day-to-day functioning of the school. Third-party services may be called upon in case of lack of good teachers.
Government can promote such formation of co-operatives and aid the schools strengthening such a system. In case of Government aid, the operating expenses of the school will come down significantly helping the co-operative to invest the funds in ICT infrastructure etc.
With the entry of co-operatives in education, such educational institutes should be allowed to be profit-making as that will drive the engagement of local community in running the school.
India is rapidly growing and with an increasing percentage of people in the younger demographic the importance of school education cannot be understated. With rising income people want better amenities - classrooms, libraries, course material, better methods of teaching and better combination of subjects. The Credit Suisse 2012 survey reported that Indians spend 10% of their house budget on education and nearly 33% of students attend extra classes. There is a massive demand supply mismatch according to a report by Technopak. The diagram below summarizes this mismatch.
FDI is allowed in the education sector under the automatic route but the plethora of regulations and control ensures that there has been below par investment in school education. The RTE Act requires that for elementary education (standard I-VIII), private schools offer 25% of the seats free to weaker sections and disadvantaged groups, failing which they would face steep penalties and even compulsory closure. Public schools would not face any specific and time-bound penalty and this indicates that private schools will bear a heavier brunt of RTE norms. Certain state governments like Tamil Nadu and Maharashtra have also moved to legislate on fees charged. All these legal implications will have bearing on school operations in the future.
Quality of education remains a problem in India. Most of the problems exist because of the archaic governance structure which prohibits scalability of non-governmental educational institutes. A wider participation by private sector, joint collaborations between the private sector and the central and the state governments should be there to improve the overall quality of the education system. Despite the legal maze, local schools are already profit-making through use of creative means such as two-tier structures. Till the time there is relaxation of current rules, entrepreneurs will continue to circumvent the intent of law to milk the school cow. Ultimately the state loses out on tax revenues. There will be a continued lack of investments which ultimately does not bode well for school education in India.
As the expansion of primary and secondary education is achieved, it is important now that the quality of education also goes up. Given the constraints such as lack of good teachers, technology can play an enabling role. With the availability of technology and educational solutions which cover all aspects of school administration, there is a greater scope for local communities to ensure that the quality of education is raised.
Co-operatives in education can serve this purpose by engaging local parent community in running of schools. This will also ensure that social inclusion is balanced with quality of education. Such co-operative societies can become priority lenders for education and the government can allow them to be profit-making body under well-defined regulation structure. Such co-operative societies will ensure that the government aid actually is used for educational purposes and is not siphoned off.
This new model of co-operative education will not only impact the reach and the governance issues of school education but will also ensure that the quality of education in rural areas will be improved.