WORKING DRAFT Last Modified 3/4/2014 1:23 AM India Standard Time Printed 26/01/ :36 India Standard Time Opportunity for PPP in India McKinsey study highlights January, 2014

Last Modified 3/4/2014 1:23 AM India Standard Time Printed 26/01/ :36 India Standard Time 1 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 / month fee ▪ PPP critical to make them affordable and therefore scalable “RTE-superimposed” likely to be Rs / month in fee ▪ Enhancements may be needed to address implementation challenges 25% reservation in elite schools as per RTE (an existing form of PPP)

Last Modified 3/4/2014 1:23 AM India Standard Time Printed 26/01/ :36 India Standard Time 2 PPPs in school education could be a ` 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 Scale 1 Funding gap 2 English medium opportunity Scale 1 Funding gap 2 # of schools` cr. per year# of schools` cr. per year 2,500-3,000 4,500-5, Over next 5 years Over next 10 years 1,000-1,200 2,500-3, 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….

Last Modified 3/4/2014 1:23 AM India Standard Time Printed 26/01/ :36 India Standard Time 3 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 selection 1 Decision rights and governance 2 Funding mechanism 3 Outcomes assessment & consequence management 4 ▪ Annual outcomes assessment to be conducted by a qualified 3 rd 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 1 st 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)