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Opportunity for PPP in IndiaMcKinsey study highlights

January, 2014

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There is an immense need for public-private partnerships (PPPs) to provide high quality school education to under-privileged children in India

All the possible options for under-privileged children… …can benefit significantly from PPP

▪ Well-structured private expertise could help improve the quality, where there is a significant challenge as per several studies

Government schools: serve between 30 and 60% of children in various urban locations; close to 13,000 schools in the top 20 cities

▪ Already a form of PPP; however, no robust selection or performance evaluation

▪ Well-defined PPP needed for quality enhancement

Government aided schools (an existing form of public-private partnership or PPP); close to 6000 schools in the top 20 cities

Affordable private schools

▪ Very small in number/volume▪ PPP critical to reduce donor funding and

therefore make them scalable

Donor-funded schools (sometimes with government infrastructure)

▪ Quality challenges▪ May not sustain without RTE compliance

Non-RTE compliant: Rs. 300-700/ month fee

▪ PPP critical to make them affordable and therefore scalable

“RTE-superimposed” likely to be Rs. 1200-1500++/ month in fee

▪ Enhancements may be needed to address implementation challenges

25% reservation in elite schools as per RTE (an existing form of PPP)

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PPPs in school education could be a `350-400 cr funding requirement with a scale of 2,500-3,000 schools in top 20 cities over next 5 years

Several factors coming together to make PPPs a reality

▪ Government schools – Low quality; PPP critical for quality enhancement

▪ Aided schools – Already PPP but not well-defined processes for selection and outcomes evaluation

▪ Affordable pvt. schools – Not scalable and quality not consistently better

▪ Donor-funded schools – Small in number and not scalable

▪ Govts. are increasingly becoming willing (e.g., Punjab, Haryana, AP) and some have defined PPP policies (e.g., Mumbai, South Delhi, Gujarat)

▪ Operating Foundations interested in running PPP schools

▪ Donors willing to fund different PPP models

▪ Specific PPP models emerging as feasible options

+

Immense need for PPPs in Indian school education

PPP opportunity

Overall opportunity

Scale1 Funding gap2

English medium opportunity

Scale1 Funding gap2

# of schools ` cr. per year # of schools ` cr. per year

2,500-3,000

4,500-5,000

350-400

600-700

Over next 5 years

Over next 10 years

1,000-1,200

2,500-3,000

150-180

350-400

1 Assumes 40-50% govts. interested and 30-40% schools under PPP; assumes that English medium will grow to over 10% of total schools and will be prioritized for PPP

2 Assumes average funding gap across all feasible models to be around ` 2,000-2,600 per child per year

Of total 18,200 government + aided schools in top 20 cities….

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International experiences show that several ‘must dos’ need to be put in place to ensure seamless implementation of PPP models

▪ Tendering based on technical criteria: both objective (e.g., years of experience) and qualitative (e.g., learning outcomes in existing programs, proposed school, etc.)

▪ No financial bidding; payment fixed per child and independent of cost▪ Independent steering committee to be set up by government to act as an Authorizer,

consisting of reputed education leaders such as Director of IIT or Vice Chancellor of local university, 1-2 private industry leaders, donors, civil society leaders, ex-officio government. representatives and potentially teacher union representatives

▪ Model 2(a)– Full control over teachers (e.g., hiring, firing, training, performance mgmt., etc.)– Complete autonomy on pedagogy and overall management

▪ Model 7– Autonomy over all regular activities of teachers (attendance, training, perf. mgmt.)

▪ Escrow account to be set-up for all funds, and transferred by govt. at start of each year; Any withdrawal cheque needs authorization from school manager & assessment committee nominee

▪ Funding to be a mix of fixed (upfront) and variable (based on outcomes)

Player selection1

Decision rights and governance

2

Funding mechanism3

Outcomes assessment & consequence management

4

▪ Annual outcomes assessment to be conducted by a qualified 3rd party agency appointed by the steering committee (potentially through a tender process, with 80% weightage to technical)

▪ Funding linked to learning outcomes post 2 years; Only lead indicators such as teacher attendance, school facilities to be assessed in 1st 2 years

▪ Outcomes based incentives and penalties (financial penalty; contract renewal / duration reduction / termination) to be put in place

For Whole school PPP models (govt. infra, private teachers OR govt. teachers, private management)