We consult on the establishment of private universities, providing advisory services throughout the process. Setting up a private university in India presents several key challenges, primarily concerning entry and establishment.

At the national level, a Private Universities (Establishment and Regulation) Bill, introduced in Parliament in 1995, faced significant opposition from academics and the private sector, and its constitutionality was challenged in the Supreme Court. Consequently, the central government withdrew the bill in 2007, meaning no private university has been established by Parliament to date.

At the state level, Entry 32 of the State List empowers state governments to legislate on the incorporation, regulation, and winding up of universities. While many states have enacted umbrella acts over the past two decades to clarify the process and requirements for establishing private universities, some, like Uttar Pradesh, lack such legislation, leaving the process and requirements ambiguous.

The UGC (Establishment and Maintenance of Standards in Private Universities) Regulations of 2003 mandate that private universities be established through a separate state act, not an executive order, and restrict their jurisdiction to the incorporating state.

In Chhattisgarh, approximately 100 private universities were rapidly established via executive order (Agarwal, 2009). Many of these institutions established offsite centers for awarding degrees and diplomas, defying UGC regulations by claiming exemption due to lack of UGC funding. However, due to questionable practices, many faced difficulties, and the Supreme Court ultimately invalidated Chhattisgarh's Private Universities Act, upholding the validity of UGC regulations. This established that UGC regulations are binding regardless of funding.

The requirement of legislative enactment for establishing private universities is a cumbersome and lengthy process. While intended to foster legislative discussion, data from PRS Legislative Research indicates poor state legislature performance. For example, Rajasthan's legislature sits for an average of 28 days annually, while Delhi's sits for only 22.

As Madhukar (2010) notes, "Bills are passed with little or no discussion. While in Parliament, referring bills to the standing committees is the norm, most state legislatures do not have standing committees... the average debate on a bill...is a little over half hour. There are many instances where bills are introduced and passed...on the same day." This undermines meaningful legislative review.

Therefore, mandating legislative establishment is not the most effective way to regulate private universities. A more beneficial approach would be to implement a robust screening process for applications and transparently define entry and operational criteria. If a state government deems itself unable to manage this process, mandatory UGC recognition, rather than simply requiring “fulfillment of conditions and provisions of UGC” as in Haryana and Rajasthan's acts, could be a more effective alternative.

Well-Defined Establishment Process

Several states, including Rajasthan, Haryana, Assam, and Gujarat, have enacted comprehensive legislation (umbrella acts) that clearly outlines the process and requirements for establishing private universities. These states typically establish private universities either through individual acts for each institution (as in Rajasthan) or by adding them to a pre-existing list of universities (as in Haryana).

In contrast, other states lack such umbrella legislation, resulting in an unclear and opaque establishment process. For example, Uttar Pradesh establishes each university through a separate act. This approach leads to inconsistent requirements that tend to increase over time, creating an uneven playing field for private institutions established at different times. New entrants face uncertainty about the specific requirements until they directly engage with the government, making the process burdensome and time-consuming

To ensure clarity and encourage private investment in higher education, every state should enact legislation that clearly defines the necessary requirements and approval process for establishing private universities

Philanthropic Orientation

Due to the definition of "sponsoring body," private universities in India can only be established through non-profit entities: societies, trusts, or Section 25 companies. Indian education (at all levels) is legally designated as a not-for-profit sector, accessible only to philanthropists and religious organizations committed to non-profit operation. However, many of these institutions are legally non-profit but operate as for-profit entities in practice.

This legally mandated not-for-profit structure creates significant financial challenges. Equity financing is unavailable because dividends cannot be distributed, and investors cannot realize gains through increased valuations. This leaves debt financing (bank loans) as the primary option. However, as confirmed by a private university official in Haryana, banks often lack experience lending to educational institutions. They typically demand cash flow projections comparable to for-profit industries and impose high interest rates.

Legalizing for-profit institutions would allow profits to be generated transparently, eliminating the need for promoters to use indirect methods to reinvest surplus funds or engage in creative accounting. It would also open the sector to equity financing, allowing publicly listed companies to access financial markets for capital. Allowing companies to establish universities would subject them to the Company Law Board and relevant consumer protection laws, and enable taxation, ultimately strengthening the higher education sector.

Internationally, numerous countries, including South Africa, Brazil, the Philippines, Malaysia, Ukraine, and several Gulf states, legally permit for-profit higher education institutions (Kinser and Levy, 2005).

Expert Consulting for Private University Establishment

We offer consulting services on the process of establishing a private university in India and in Abroad. Private universities can only be established through state legislation, as no enabling legislation exists at the National level and International level. Consequently, no private universities have been established by the central government. Furthermore, not all states have enacted their own legislation for establishing private universities.

To establish a private university, an application must be submitted to the relevant state government, adhering to the state's Private University Act or other applicable guidelines. Application formats and required details vary by state, as do the application process and response timelines.

Following the application process, a bill to establish the university is introduced in the state legislative assembly. Upon passage and gubernatorial approval, the private university gains legal status, contingent on fulfilling any remaining requirements. Once established, the university can begin accepting student applications and offering courses.

As consultants specializing in establishing private universities in India, our team provides comprehensive, end-to-end consulting services for the entire setup process.