Cabinet gives nod to Higher Education Financing Agency (HEFA)

The government will soon set up a Higher Education Financing Agency (HEFA), that would provide the much needed funds to boost research oriented infrastructure for premiere institutions like IITs, NITs and IIMs.
The Union Cabinet, chaired by Prime Minister Narendra Modi, gave its nod to a proposal of the HRD ministry for creation of HEFA today.
Speaking to reporters here, HRD minister Prakash Javadekar said HEFA would be jointly promoted by the identified promoter and HRD ministry with an authorised capital of Rs 2,000 crore of which government equity would be Rs 1,000 crore.
The HEFA would be formed as a SPV within a PSU Bank/ Government-owned-NBFC (Promoter) and it would leverage the equity to raise up to Rs 20,000 crore for funding projects for infrastructure and development of world class labs in institutions like IITs, IIMs and NITs etc, Javadekar said.

The HEFA would also mobilise CSR funds from PSUs and Corporates, which would in turn be released for promoting research and innovation in these institutions on grant basis, a statement released by the ministry said.
HEFA would finance the civil and lab infrastructure projects through a 10-year loan, the statement said, adding that principal portion of the loan will be repaid through the 'internal accruals' (earned through the fee receipts, research earnings etc.) of the institutions.

The Government would service the interest portion through the regular Plan assistance. All the Centrally Funded Higher Educational Institutions would be eligible for joining as members of the HEFA.

When asked how HEFA would raise funds, officials said that it could be through bond market by floating education bonds or through debt market.
For joining as members, the Institution should agree to escrow a specific amount from their internal accruals to HEFA for a period of 10 years. This secured future flows would be securitised by the HEFA for mobilising the funds from the market.
The HRD minister also said that he is planning to
introduce target-based bonuses and penalties for educational institutions like it is done in the case of roads and highways.
"If a project is completed before time, we will provide a bonus and if it is not completed as per schedule, there can be a penalty for the concerned entity," Javadekar said.

Asked if the creation of HEFA would also have an impact on funds allotted to premiere educational institutions during budget, Javadekar said that this initiative does not mean that budget funds would get reduced.
Responding to questions, he also said that this also should not be viewed as a proposal to increase fees.
He said institutions like IISERs require more funds than what they generate from fees and HEFA funds will help them.
There is a several year backlog in terms of infrastructure, which will be met, the HRD minister said.
These institutes can return the principal sum from their earnings from activities like research and consultancy, while the government can take care of the interest part, he said.

Officials said that two Public Sector Banks have shown interest in becoming a partner in HEFA SPV and a decision will soon be taken in this regard.
The HEFA Board will be chaired by Secretary, Higher Education in the HRD ministry, a source said, adding that managing funds would be left to banking and finance professionals.
The creation of HEFA was announced by Finance Minister Arun Jaitley in his Budget speech.