HEFA Current Affairs - 2019
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The Indian Institutes of Technology (IITs) will get largest chunk of loans on offer under Revitalising Infrastructure and Systems in Education (RISE), new funding model scheme for all centrally-run institutes. This shifts funding mechanism to CFIs in higher education from grant assistance to loans to assure more funds, greater accountability and timely completion of projects. Earlier, CFIs, on an average used to get fixed Budget grants of Rs 10,000 crore every year.
RISE scheme was announced in Union Budget 2017-18. It aims to lend low-cost funds to government higher educational institutions. Under it, all centrally-funded institutes (CFIs), including central universities, IITs, IIMs, NITs and IISERs can borrow from a Rs 1,00,000 crore corpus over next 4 years to expand and build new infrastructure. It will be financed via restructured Higher Education Financing Agency (HEFA), a non-banking financial company. Distribution of loans under RISE Scheme is as follows
With introduction of RISE, all financing for infrastructure development at CFIs in higher education will be done through HEFA, which was set up by government as a Section 8 company (a company with charitable objectives) in 2017 to mobilise funds from the market and offer 10-year loans to centrally-run institutes.
Equity Share: In order to mobilise funds Rs. 1 lakh crore corpus under RISE, HEFA will need equity of Rs 10,000 crore, of which Rs 8,500 crore will be provided government and remaining by Canara Bank, which partnered with government to set up HEFA, and other corporations.
Target: All infrastructure and research projects sanctioned by HEFA are to be completed by December 2022.
Fund Raising: HEFA will release money directly to vendors or contractors on certification by executing agency and educational institute. Loans taken from HEFA, under the RISE programme, will be paid back over 10 years. There will be different modes of loan repayment for different institutes, based on their internal revenue.
The Higher Education Funding Agency (HEFA) has approved projects worth over Rs. 2,066 crore for six higher educational institutions to improve the research infrastructure and further their standing at global level. These six institutes are IITs Bombay, Delhi, Madras, Kharagpur, Kanpur and NIT Suratkal.
Decision in this regard was taken at 2nd HEFA Board meeting chaired by Chairmanship of Secretary Higher Education. The approved funds will be in addition to grants being given to these institutions by the government.
Higher Education Funding Agency (HEFA)
HEFA was set in September 2016 after it received Cabinet approval to provide financial assistance to institutes of higher education in addition to grants given by Union Ministry of Human Resources Development. It has authorised capital of Rs. 2000 crore. Government equity in it is Rs.1000 crore.
It is not-for-profit organisation that will leverage funds from market and supplement them with donations and Corporate Social Responsibility (CSR) funds. These funds will be used to finance improvement in infrastructure in top institutions and will be serviced through internal accruals.
Modalities of operation of HEFA
HEFA is novel method for funding premier institutions by using instrument of securitising future flows. Under it, each institution agrees to escrow specific amount from their internally earned resources and not through government grants.
This forms basis for credit line which can be used by institution for creating required capital and research assets. The Principal portion is repaid from escrowed amount and interest is met by Government. For institution, this is interest-free amount and gives facility to institution to build the required research infrastructure of world class.
Operationalisation of HEFA
HEFA was registered as Section – 8 Company under Companies Act in May 2017. Canara Bank was identified as partner for setting up Company. RBI also has granted license under RBI Act for HEFA to operate as Non-Banking Financial Company (NBFC) in November 2017 and to leverage equity to mobilise money from market as per requirements of the institutions.